Supply-side issues need addressing quickly

Simon Jackson is managing director at SDL Surveying

The latest residential property sales figures registered by Land Registry during March will probably come as no surprise to any housing market stakeholder.

We’re all acutely aware of just how busy the market has been over the past six or so months, and therefore to learn that March’s figures were over 32% up on February, and over 100% higher than March 2020, is unlikely to register as a seismic surprise.

Indeed, one might wonder just what would have happened during March if the government hadn’t chosen to extend the stamp duty holiday in the Budget, and it might lead us to believe that – particularly for April through June, and potentially up until the end of September – the Land Registry numbers will continue to be very strong and are likely to dwarf last year’s corresponding months.

No one within the market will begrudge a busy 2021, especially after the last year where – even if housing has proven to be one of the more resilient pandemic-affected sectors – it has undoubtedly been a stressful time for all.

Clearly, we currently have a time of very strong demand, middling (at best) supply and a post-lockdown boost is likely to strengthen the former, and hopefully do the same for the latter, especially if more people feel confident in putting their homes on the market, having agents and prospective buyers back into their properties, and we have a much more normal home-buying process.

That said, it’s always fair to say that housing supply continues to fall well short of demand, and even if existing homeowners are more willing to put their properties up for sale, that doesn’t add to the number of new homes required each and every single year.

For a reason I can’t quite fathom, a figure of 250,000 new homes per year being required tends to be cited when this debate happens. The fact of the matter is that this country has only very rarely got anywhere near this figure over the last two decades, so the actual gap is far wider. Even if we were to get that quarter of a million, that would not make up for the many years where the target was not met.

In other words, supply is in short supply – even in the good years. In 2019, 160,319 new properties were registered to be built, according to the NHBC; in 2020 this – again perhaps not surprising – had dropped to 123,151. So, in the last two years we’re over 200,000 short of the 500,000 needed to stand still.

The government’s own target is actually higher at 300,000 new homes every year by the mid-2020s – how confident is it now, especially with the pandemic, of hitting that target? It has a £4.5 billion Home Building Fund, and just recently launched a new £150m Help to Build scheme for self-builders, plus the Help to Buy scheme is focused on new-build and the like. This will all help without necessarily getting the government any closer to hitting that 300k target, which somehow feels even more ambitious given what the country has, and is, going through.

There are challenges of course for surveyors within the new-build space – we’ve recently launched a new-build product, are working with a significant lender in this space, and talking to others, so the good news is that – from a lending perspective – there is a growing appetite to do more here.

Overall though there has to be a recognition that new property supply should be an ongoing priority for whatever government is in office. Indeed, there is much to be said for housing being treated as a non-partisan issue, but that is likely to be nothing more than pipe dream, given the political clout it offers whichever party is in power.

However, it is clearly vital that governments focus just as much on the supply side issues as demand – probably even more so, given we have a very strong home-owning culture and that always looks likely to be the case.

2021 will give us a much better idea if that 300k figure is achievable but I think we all know that this is going to require a considerable amount of work, and – quite likely – a considerable amount of ongoing government financing.