Collapse in new house building.

Graham_Devon

What happened to the theory that builders build more when house prices increase?? It's been a well used theory for the last 3 or 4 years.

The number of new homes being built collapsed in the second half of last year, official figures showed yesterday. The news will be a grave embarrassment for ministers who have been claiming that the construction industry is booming and that housing supply is finally coming into line with demand.

There were only 29,800 new housing starts in England in the final quarter of 2014, the Communities Department reported. That represented a 10 per cent decline since in the third quarter and a 20 per cent fall from the 36,770 homes begun in the second quarter. The quarterly figures are now just 4 per cent above the 28,630 housing starts reported in the first three months of 2013, when George Osborne announced his Help to Buy subsidy scheme.

As recently as September, the Chancellor boasted that Help to Buy was “driving a big increase in housebuilding in Britain, boosting the construction industry and increasing housing supply”.

But The Independent revealed earlier this month that Treasury experts had warned ministers in early 2013 that Help to Buy would have little impact on housing supply. The International Monetary Fund also predicted that the mortgage subsidies would merely push up prices rather than boosting construction.

http://www.independent.co.uk/news/business/news/collapse-in-new-housebuilding-heaps-pressure-on-ministers-10058336.html

Generali

Graham_Devon wrote: »

What happened to the theory that builders build more when house prices increase?? It's been a well used theory for the last 3 or 4 years.


http://www.independent.co.uk/news/business/news/collapse-in-new-housebuilding-heaps-pressure-on-ministers-10058336.html

I guess it's proving HAMISH right: the mortgage market needs to be fixed for the housing market to be fixed.

HAMISH_MCTAVISH

Generali wrote: »

I guess it's proving HAMISH right: the mortgage market needs to be fixed for the housing market to be fixed.

Yep.

Mortgage rationing remains a severe problem, still only issuing around 50%-60% of the mortgages we were in 2006/7, and in the last half of 2014 the numbers of mortgages being issued declined.

Therefore it should be of no surprise to anyone that the number of houses being built also declined.

Builders won't build what they can't sell.:cool:

princeofpounds

What happened to the theory that builders build more when house prices increase??

I don't think that was a 'theory', beyond simple supply and demand economics.

But builders are not the bottleneck in supply. Planning is (and, depending on who you believe and when you are talking about, so was financing).

Planning is rather price-insensitive.

Furthermore, I don't think the article really explores the reason for these stats well at all. It is not uncommon to see them distorted over short time periods for various administrative and business reasons.

stator

The private sector can not supply Britain's needed housing supply.
Time to bring back council lead building.

wotsthat

Graham_Devon wrote: »

What happened to the theory that builders build more when house prices increase?? It's been a well used theory for the last 3 or 4 years.

It's a well used theory that as price increases the market reacts to increase supply. House building isn't different so if prices increase and supply doesn't react there must be something stifling that supply - planning, mortgages, new house buyers sick of having to buy a proportion of another new house to house a benefit claimant?

princeofpounds

The private sector can not supply Britain's needed housing supply.
Time to bring back council lead building.

The main reason it can't do that is because councils themselves suffocate private building.

It's somewhat ridiculous to make councils stump up for an expensive solution when they are causing the primary problem.

Actually building a house costs peanuts, compared to the price of acquiring one (in the south at least, where building is actually needed). It's the scarcity of land (and Section 106 [STRIKE]agreements [/STRIKE]taxation) that kills off projects.

CLAPTON

presumably there wasn't any change to the way mortgages affordability was determined during the year at all?

daveyjp

princeofpounds wrote: »

The main reason it can't do that is because councils themselves suffocate private building.

It's somewhat ridiculous to make councils stump up for an expensive solution when they are causing the primary problem.

Actually building a house costs peanuts, compared to the price of acquiring one (in the south at least, where building is actually needed). It's the scarcity of land (and Section 106 [STRIKE]agreements [/STRIKE]taxation) that kills off projects.

Land value is also linked to the end value of the house.

s106 can be negotiated to zero if evidence is provided by the developer that the amounts make the scheme undeliverable.

Generali

CLAPTON wrote: »

presumably there wasn't any change to the way mortgages affordability was determined during the year at all?

Aren't you close to the ground with that one? What's the answer?

stator

daveyjp wrote: »

Land value is also linked to the end value of the house.

s106 can be negotiated to zero if evidence is provided by the developer that the amounts make the scheme undeliverable.

They can also waive the affordable home requirements, and have done so on many occasions.

Due to the 'bonus' payments they get, councils are actually keen on allowing houses to be built and will fall over backwards helping new schemes get going.

The main problem is that land owners want too much money as they see houses are selling for £300,000 each and so estimate that their land must be worth £5million, so compulsory purchase is the answer. Councils could buy the land, design the estate and then divvy up the plots, some to each developer who can just get on and build the houses. Sell some of them on the open market and keep a few for social housing. Problem solved