A lost decade for house building: What has changed since the last rate rise?

by: Christine Toner
  • 02/11/2017
  • 0
A lost decade for house building: What has changed since the last rate rise?
As had been widely expected, the Bank of England (BoE) Monetary Policy Committee (MPC) voted in favour of a Base Rate rise for the first time in a decade. Specialist Lending Solutions considers how house building has changed during this time.

The last time we saw an increase in the BoE Base Rate, in July 2007, Gordon Brown was Prime Minister, Alistair Darling was holding the country’s purse strings, Northern Rock was ticking along nicely (or so we thought) and rates above 5% were the norm.

But what did the housing market look like back then? And, in particular, was the housing crisis worse or better than it is today? Let’s take a look.


The shortage of homes

2007: A decade ago the Home Builders Federation (HBF) was reporting a housing crisis. In a factsheet detailing the state of the industry it claimed: “Current home building levels are nowhere near enough to meet demand. Last year 160,000 new homes were built in England, compared with projected household growth of 223,000 per year.”

2017: Not a lot has changed on the home building front, it seems. According to the Department for Communities and Local Government (DCLG), in the 12 months to May 162,880 homes were started and 147,960 were completed. A worrying sign since the HBF was warning of too few being built back in 2007.


Property prices

2007: Average house prices in the UK peaked at £181,383 in November 2007 and reports at the time claimed first-time buyers were being priced out of the market.

2017: Today the average house price in the UK stands at £225,956, considerably higher than 10 years ago, but with continued claims of first-time buyers being unable to get on the ladder.


Government targets

2007: Just before the bottom fell out of the economy the government set a housing target of 240,000 homes per year by 2016, and a total of three million homes by 2020.

2017: While we’re not at 2020 yet, it’s fair to say those targets have been missed.  A report by the Federation of Master Builders issued late last year revealed 87% of local authorities do not believe it will be possible for the government to meet due to under-resourced planning departments. David Cameron’s later plan to build one million homes by 2020, announced in 2015, was quietly dropped earlier this year.


Planning concerns

2007: The HBF reported an average of 35% of residential planning applications were rejected in 2007, well up from an average of around 16% a decade earlier.

2017: There’s certainly been an improvement here. The HBF reported in the 12 months to Q2 2016 8.5% more units were granted planning permission in England compared with the year to Q1 2007. Meanwhile a report commissioned by the Local Government Association claims councils approve nine in every 10 applications but says developers are taking longer to complete work on site.

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