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The impact shortfalls have in UK housing supply

November 30, 2022

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Article Summary

Manchester
  • There simply are not enough properties being built to keep up with the growing population, and this problem does not look like it is changing anytime soon.

  • Earlier this year, the Government set a goal of building 300,000 new homes a year to try and satisfy the exponentially increasing UK population.

  • There is a lack of available properties for an increasing population and house prices are seemingly going up, though this is not fully the case and we will go on to explain why that is.

There is a trend that is very obvious in certain cities in the UK. London, Manchester, Leeds and Brighton, as the UK has been suffering with an ever-growing issue when it comes to available properties for residents. There simply are not enough properties being built to keep up with the growing population, and this problem does not look like it is changing anytime soon.

A recent example is in the Manchester City Centre, where a fear of oversupplying new homes has actually prompted some developers to pause their activity, so there is now a shortfall in the supply pipeline to meet anticipated demand. (JLL) This resulted in the lowest number of untenanted rental properties in the city, dropping to its lowest recorded rate, with just 360 properties available in Q3 of 2022. It caused a sharp increase in rents.

Earlier this year, the Government set a goal of building 300,000 new homes a year to try and satisfy the exponentially increasing UK population. This shows their intent at trying to rectify the situation, though it will be a challenge. ONS forecast that the number of households in the UK will increase by 1.6 million (7.1%) over the next 10 years to 24.8 million, and yet the current rate of home construction is struggling to increase, resulting in a shortfall of 30-50%.

The government has taken action recently though, as thousands of new homes are set to be built on neglected land under a new £175 million government scheme. The funding will be used to turn council-owned land, such as redundant industrial sites, unused car parks and abandoned buildings, into new neighbourhoods and communities.

A total of 59 regeneration projects, from Exeter to Sunderland, have been approved to receive the first £35 million under the scheme. The remaining amount will be spread across the next couple of years.

There are a number of factors that affect housing prices, which can be categorised into two different sections: demand-side and supply-side factors. Examples of factors of demand include mortgage rates, population, real income level and demand for space. The supply-side directly influences housing prices which includes land availability, profitability and regulations.

This is evident in the current marketing environment, as there is a lack of available properties for an increasing population and house prices are seemingly going up, though this is not fully the case and we will go on to explain why that is.

The small number of available UK properties highlights the opportunity that NPG presents to potential buyers. We have several properties available in high demand cities such as Manchester, Leeds and Brighton & Hove, all for some of the best values in the market. These properties also show high rental yields, bringing investors high capital growth in their investments.

The property market always maintains its demand through thick and thin, and the fact that we have a high number of available properties in what has been dubbed as a ‘recession’ shows you that the current situation is not as bad or worrying as it has been made out to be.

You may remember the chaos that surrounded the sudden spike in mortgage rates, but here, a few weeks on, rates have dropped below 5% and look to be heading even lower as the economy settles down after a turbulent year.

The prime time to buy property is when the majority of potential investors are unsure, as prices will be lower as the market drops in value. In addition to this, it is worth noting that developers often re-evaluate the prices of their properties every half year, usually increasing them.

We know this as we have a good relationship with the developer for one of our marketed properties. The developer is set to increase the price by 5-10% in mid-December, meaning that any buyers between then and now will already have made profit.

It really is the ideal time to invest in UK property, with the option of buy-to let becoming an increasingly popular choice for investors due to the extremely high tenancy demand in the UK, while unit availability stays low.

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