In the year to end March 2018 new build house prices rose on average by 8.6% across the UK which is up on last year’s figure of 5.7%, according to the LSL New Homes Index.
The LSL Land and New Homes ‘New Build Market Review 2006 to Sept 2017’ gives an overview of the new build market over the past decade. It looks at the overall volume of new build transactions as well as the value of the new build market and provides a detailed analysis by region and property type.
Recent analysis shows a marked decline in the volume of transactions between 2007 and 2011 with a healthy and steady recovery occurring thereafter and up to 2016. The trend line looks to be reaching a plateau, in line with industry output predictions, which themselves reflect the general economic uncertainty.
As always, there does not seem to be a clear message from the various economic indicators that would encourage house builders to start opening more sites in anticipation of more sales. The same report shows the average purchase price for detached houses.
Over the decade up to 2017 average detached house prices started at around £320,000 then fell to a low point average price of about £290,000 before increasing to around £360,000 at present.
The relatively modest increase reflects the fact that most flats are built in the regions where land is more easily obtained and where, as discussed previously, price rises have been more sedate. Figures just out through the Labour Force Survey show a seasonally adjusted unemployment rate of 4.2% for the three months to Feb 2018.
There were 32.26 million in work, 55,000 more than the previous three months, and 427,000 more than a year earlier. The employment rate (the proportion of 16 to 64 year olds in work), was 75.4%, the highest levels since comparable records began in 1971.
With the continuation of low interest rates combined with some wage growth and generally stable house prices, the Halifax has reported that mortgages are at their most affordable level for nearly a decade. Interest rates are due to start rising at some point in the reasonably near future.
Indeed, a number of leading banks have recently increased mortgage rates in anticipation of another interest rate increase.
Finally, the government’s view seems to be very London centric. In some regions prices are not much higher than they were in at the 2007 to 2008 peak. And in Greater London house prices are at best stagnant and possibly falling, added to which is the considerable uncertainty that Brexit brings, particularly to the service sector based Southern regions.
These aren’t market conditions that would encourage companies to hold on to land in the expectation of rising prices, so again they don’t support the claim of land banking.