In the year to end February 2018 new build house prices rose on average by 9.7% across the UK, which is up on last year’s figure of 5.3%, according to the LSL New Homes Index.
Volume has also increased. Of the 85,249 sales the Land Registry received for registration in February 2018, 16,133 were newly built, a 11.8% increase on February 2017.
LSL New Homes looked at the most recent annual house price change data from three leading indices: Nationwide, HM Land Registry/ONS and LSL Acadata.
Whilst there are some quite significant differences between the reported price rises for each region, the picture is clearly one of a wave that has now spread out to the regions from London, it said. However, prices in London are now over 60% higher than the level they were at in 2007 which is more than fifteen times the growth seen in the Northern regions. The main growth has now moved away from the regions that have seen most growth to date.
423,544 is the number of residential units that have planning permission which is yet to be implemented according to analysis by the Local Government Association, the index noted. The accusation levelled at developers is that they are ‘land banking’ or holding onto the land whilst the value goes up.
“The implication is that the failure of the younger generation to get on the housing ladder is in part down to the developers,” the Index said. “Whilst this represents easy political capital as typified by Teresa May saying ‘young are right to be angry about the lack of homes’, there are some holes in the argument.
“Housebuilding output has been growing in recent years but the total volume of all house sales is relatively fixed and housebuilders have to operate within the wider housing market. The market can only consume a certain amount of new build each year. New build sites come in relatively large blocks of property in set locations whilst the demand for extra housing is widespread across all areas.
“It isn’t so easy to increase supply when demand is fixed, so there would probably be a local demand and supply mismatch. Too much supply pushes prices down which would make sites unviable. And of course, houses have to be built, mostly by large well established companies.
“Those companies rely on labour and materials, both of which are in short supply. And add to this the process that must be gone through to go from a site with planning permission and many conditions to a finished estate of houses. All of these factors limit the ability to increase supply, certainly at any sort of pace.
“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.”