The UK housing market is inefficient, with weak supply causing problems for house price volatility and the UK’s economic wellbeing, according to the Treasury. Kate Barker’s Review of Housing Supply, accuses the housing industry of being unresponsive to demand and reluctant to develop brownfield sites. The review also states that the UK economy would have been £8bn better off if house price inflation had kept in line with European averages.
With new house building at the lowest level since the Second World War, the report said: “Historically, UK housing supply has been unresponsive to changes in price – three times less responsive than in the US and four times less responsive than Germany. Over the last 10-15 years, UK housing supply appears to have become entirely unresponsive – as prices rose, house building did not increase.”
It added that many developers hold large land banks with planning development, and estimated an extra 145,000 houses annually are needed to bring levels of house price inflation in line with Europe.
David Bexon, chief executive of online new home specialist SmartNewHomes.com, said: “The building industry takes the risk in constructing much needed new homes. It is they who have to sell the homes so you can hardly blame the industry if they build at a responsible pace to suit the economic climate at the time. Today’s boom may be tomorrow’s slowdown.
“Ms Barker says the housebuilding industry shows a reluctance to invest in brownfield developments, this is untrue. The same impediments apply as far as planning goes to brownfield sites as virgin green belt.”
The Treasury has identified the housing market as one of the barriers to meeting the five economic tests for entry into the Euro. The review’s final report in the Spring will suggest policy proposals to address issues identified.
The Association of Mortgage Intermediaries (AMI) submitted information to the report’s authors. Chris Cummings, director of mortgage projects at AMI, said: “The extra cost associated with the shortage of housing has an effect on everyone in the mortgage chain. We will put more evidence towards highlighting the changing nature of the UK mortgage market.”