London and the South East are facing a 500,000 shortage in housing stock if the decline in house building is not reversed.
According to the Halifax House Price Index for July, 172,000 houses were built in 2002 in the area, and 162,000 in 2001. The figure for 2001 was the lowest number since 1949.
The warning comes as the Government announces part of its Sustainable Communities Plan to build 120,000 homes in the Thames Gateway, although it is expected to take several years before this has any serious impact on housing pressures (see page 7).
Pierre Williams, spokesman for the House Builders Federation, said: ‘The key factor behind rampant and long-term house price inflation is undersupply: too much money chasing too few homes. With the number of households increasing at 220,000 a year but the number of new homes being built at just 170,000, housing undersupply is getting worse at a rate of 50,000 a year.’
The Index reported an average monthly house-price rise of 1.3%, and a 19.2% rise on July last year. Martin Ellis, chief economist at Halifax, said: ‘The housing market is strong. With mortgage rates at a 50-year low, benign unemployment prospects and affordability levels below the long-term average, the market continues to be underpinned by strong fundamentals.’
Halifax did not express fears at the rising levels of debt in the UK consumer market, and said it was reassured by figures from the Council of Mortgage Lenders, which showed the average loan to value in the UK was down from 66% last year to 65%.
But problems exist for those looking to step onto the property ladder. In separate research carried out by Halifax, it found the price paid by first-time buyers had risen by 128% in the past 10 years.