U.K. Residential Property Shortage to Persist: Shapps
The U.K. is unlikely to ever develop enough houses and apartments to meet the demand of its population, Housing Minister Grant Shapps said.
Britain needs to build around 245,000 residential properties annually in the decade through 2023 to meet demand, according to the Department for Communities and Local Government. That would leave a shortfall of at least 43,000 homes a year for the next five, Savills Plc (SVS) estimates.
“There isn’t one thing you can do to solve this,” Shapps said in an interview yesterday. “In the really best possible imaginable circumstances, the boom in the housing market, we were still only building 170,000,” he said. “If you couldn’t do it then, it’s even harder now.”
Prime Minister David Cameron is overhauling Britain’s housing market after the amount of homes built in England and Wales in 2010 was the lowest during peace time since 1924. The coalition of Conservatives and Liberal Democrats are easing planning laws, releasing public land and underwriting part of a loan to buyers of new properties to spur construction.
With unemployment rising and home values falling, lenders are less willing to provide new credit or refinance existing loans. Last year, 141 billion pounds of mortgages were originated in the U.K. compared with 363 billion pounds in 2007, according to the Council of Mortgage Lenders.
“We won’t get to the total unless we’re living in a much better economy,” said Shapps, a Conservative lawmaker, in his office. “Today, we’re facing an incredibly tough global economy, euro-zone crisis, problems with mortgages, household incomes.”
The government introduced a state-backed mortgage program in March allowing buyers with small cash deposits to get loans for as much as 95 percent of the value of a newly built home. About 400 people have reserved properties through the program called NewBuy, the Home Builders Federation said on May 17.
The average asking price for a home in London rose 0.9 percent in May from a month earlier to 469,314 pounds ($741,000), Rightmove Plc said yesterday. That’s the most since the operator of Britain’s biggest property website started keeping the data in 2002. Nationally, values were little changed in May from the previous month.
The U.K. economy fell into its second recession since 2009 in the first quarter amid Cameron’s spending cuts, the deepest fiscal squeeze since World War II. The double-dip contraction is the first since 1975.
Lack of Mortgages
“It’s still a challenging climate,” said Steve Turner, a spokesman for the Home Builders Federation, by phone. “The main constraints are a lack of mortgage availability, having enough developable land coming through the planning system and regulation.”
Britain began construction on 139,430 homes last year compared with 124,460 properties the year before, according to the department. Homebuilders including Barratt Developments Plc (BDEV) and Taylor Wimpey Plc (TW/) moved their focus away from high volume development toward single family homes with wider margins after facing hundreds of millions of pounds of writedowns and falling sales in the aftermath of the housing collapse in 2007.
To contact the reporter on this story: Chris Spillane in London at email@example.com.