Latest figures show that the number of homes on the market is nearing a record low, partly due to slow rates of construction.
Nationwide Building Society published the figures today, declaring that housebuilders must build more houses and at a faster rate of construction in order to help reverse this trend.
However contrary to what might be expected, the building society’s data also revealed that annual house price inflation fell from 5.6% in August to 5.3% in September.
Prices rose by 0.3% between August and September, half the 0.6% rise seen the month before.
Therefore, while the demand for homes has fallen, so too has the number of properties coming on to the market.
Nationwide puts the average price of a house or flat in the UK at £206,015.
Commenting on the shortage of housing in the UK and particularly London, Nationwide’s chief economist, Robert Gardner said that there are plenty of sites where housebuilders could begin construction.
"The major housebuilders appear to have capacity to expand output, with most reporting land banks that could support around five years' worth of construction at current rates of building activity."
Although the latest Government figures reveal that 139,000 new houses were completed in the UK last year, this is a short of the 225,000 new homes that Mr Gardner says are required.
"The number of new homes built in England has picked up, but is still not sufficient to keep up with the expected increase in the population," he said.
In response to Mr Gardner’s claims, the housebuilding industry argued that there has been a huge increase in supply, with yet more housing planned.
In addition, the Home Builders Federation (HBF) recently published a report entitled Ghost Towns, which suggests that the Government’s most publicised measure of house building excludes around a fifth of all new build completions every year.
The report outlines how flawed methodology and poor returns from Local Authorities mean around 30,000 new builds are not counted in the official numbers.
“Analysis shows that the ill-termed ‘House Building Statistics’, released on a quarterly and annual basis by the Department of Communities and Local Government (DCLG) underreport new build completions in 75% of Local Authorities with an average of 153 new homes ‘lost’ in each of those areas,”
the report states.
It goes on to say that more than half of new build homes in towns such as Birmingham, Liverpool, Leicester, Salford and London are not accounted for in the quarterly series.
Whereas the Government’s ‘Net Supply of Housing’ data series published once a year is drawn from more reliable sources, HBF says, and it is this series that indicates that new build housing stock was actually up 20% year on year in 2014/15.
Responding directly to Nationwide’s claims, Stewart Baseley, executive chairman of the HBF told the BBC:
"House builders have massively increased output over the past few years and continue to recruit the people and buy the land necessary to deliver even more desperately needed homes."
"Reversing decades of under supply requires government to continue to implement pro development policies and lenders to ensure buyers can get a mortgage."
Mr Gardner argued however that simply not enough homes are being built in the London area. Where the housing stock in the capital rose by 2.9% last year, Gardner believes a rise of 4.3% should have been expected.
London workers who are prepared to commute up to an hour into work could save nearly £450,000 (60%) on the cost of a house, new research has found.
A study, carried out by Lloyds Bank, has found that average house prices drop by 60% from £741,919 in central London to £294,903 in commuter towns an hour outside of London, such as Wellingborough, Southend, Sittingbourne and Rugby.
This equates to an average saving of £447,015 (or 60%) in house prices.
Even though transport expenses rise with a longer commute, at an average cost of £5,000 for a rail card, a commuter would need to make the journey for 89 years to cancel out the saving.
Commuters who want to live closer to London, in areas such as Hatfield, Billericay, Orpington and Reading, could still make serious savings. The average house price in these areas stands at £389,000, making them 48% cheaper (£353,000) than central London and with a lower than average annual rail pass costing £3,500.
Andrew Mason, Lloyds Bank mortgage products director, said: “Commuters to London who don’t mind a longer journey between home and work could reap the financial benefits of living outside of the capital.
“However the decision of whether to live in the city or further away is not simply a trade-off between financial costs and journey times.
“Quality of life is also a major factor: family circumstances, better schools, physical environment and homes that offer better value for money also come into the equation.
“That explains why, especially outside London, commuters are often prepared to pay a premium to commute when they could be better off in purely financial terms living closer to their place of work.”
However, the trend does not continue nationwide. In Manchester and Birmingham, for example, Lloyds Bank found that it was cheaper to live in the city than outside it.
In Birmingham the average house price is £172,000, whereas the average house price in towns such as Derby, Coventry, Burton on Trent and Leamington Spa, which are a 40 minute rail journey away, are around £211,661.
Lloyds Bank research found the same to be true in Manchester. Surrounding towns, such as Warrington, Chorley and Macclesfield all command higher house prices of around £204,161, when compared to Britain’s third largest city (£162,214).
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30th September 2016