Despite the economic rollercoaster of the last few years, UK housebuilding is still in high demand with 4.3 million new homes needed
The British house building sector has received some important support in the form of independent confirmation that the country needs to get building. A report published in February by the Centre for Cities, a non-partisan think tank, said that the country needed to build vastly more houses if it was to catch up with the housing provision found in neighbouring countries.
Compared to the average European country, it found, Britain today has a backlog of 4.3 million homes that are missing from the national housing market as they were never built.
This housing deficit would take at least half a century to fill even if the Government’s current target to build 300,000 homes a year is reached. Tackling the problem sooner would require 442,000 homes per year over the next 25 years or 654,000 per year over the next decade in England alone,it said.
However, of the estimated 442,000 homes built every year, so far, 220,000 annually is the closest the country has come to hitting its target. According to the Centre for Cities, the answer to this puzzle is planning reform.
Room to grow for housebuilding
Even if there is disagreement on how to go forward, right across the political spectrum, everyone is in agreement that more housing is needed. The Competition and Markets Authority, the body given the task of ensuring there is sufficient competition in industries, has undertaken an investigation that will ask, among other things, what barriers to entry are faced by small and mid-sized developers.
This week’s spring budget received a mixed response with support being voiced for regional initiatives but calls continuing for better training pathways and tax incentives.
However, there are positive signs in the market. American-based bank Jeffries has told investors that it expects a 30% upside in housebuilders’ share prices. Jeffries equity analysts Glynis Johnson and Priyal Woolf said builders were “becoming increasingly difficult to ignore” as an investment opportunity, implying that the sector is on a strong footing.
Indeed, construction activity has now rebounded after a two month slowdown, according to the latest S&P Global/CIPS construction purchasing managers’ index. The index, which notes daily activity, scored 54.6% – the fastest growth since May 2022, above expectations of around 49.1.