According to the latest UK house price index, the price of newly built properties rocketed 24.8% from August 2015, while the price of existing properties rose just 7.3%.
Early indications suggest that the average price of a new build in the UK was £294,832 in August 2016; this is 12.7% higher than in July 2016 and 24.8% higher than in August 2015. In comparison, the average price of an existing property was £214,029, a mere 0.5% rise on the previous month.
However, this is an initial estimate. The ONS bases its first estimate for new builds on a small sample, which can cause volatility.
Indeed, according to the LSL New Build Index, new build prices only rose 6.0% for the year ended August 2016. Although this shows a rise on the previous three months, this increase has actually narrowed when compared to the same period ending August 2015, and is now 0.5% below the national average seen last year.
“There is continuing unpredictability following the aftermath of Brexit and the impact it will have on the market, long term,” said Shaun Peart, managing director of LSL Land & New Homes. “Early indicators show a buoyant market, proving government experts wrong.
House builders remain optimistic, as demand remains strong and buyers are able to meet lending criteria.
“Lenders, and those involved in the planning process, will be looking for thoroughly thought- out proposals and a strong track record. This ensures developers are doing all they can to speed up the approvals process. It’s then down to the local, and national, government to support them.”
On the supply side, RICS report that new sales listings remain low, falling slightly in August compared to July. The latest ONS Output in the Construction Industry reported a 0.8% monthly fall in new-build housing output in July, although output remains 6.2% higher than in July 2015. The Bank of England Agents’ Summary reported a slowdown in activity in London and surrounding areas, but unchanged activity elsewhere in the UK.
The Department for Communities and Local Government (DCLG) has a target to release land to build 160,000 homes by the end of the decade, but according to recent reports cited by LSL Land & New Homes, the DCLG is no more than 8% into this target. In March, the former chancellor announced plans to speed up the planning system, which included reducing the number of stages developers go through, by 2017, but this is still a long way off.
“There still seems to be a fundamental disconnect between housing supply and demand – not least for the developers facing increased costs and time,” said Peart. “The three main areas still need to be addressed: lack of access to public sector land, planning and a skills shortage.
“As we head into the latter part of the year all eyes will be on the government, to promote more stable conditions in the general housing market; a move that will be echoed by housebuilders, while we wait with baited breath for positive steps to be set out in the Autumn Statement.”