Research by Hometrack examining the trends in new private housing supply suggests that the Government is not meeting its priority of increasing the volume of new housing. The study can be found here.
The number of private new build properties starts has increased by 75% since 2009. However, this is still less than half the numbers being built in 2002 at the peak of the market.
In the last three years since the crash there has been a move away from flats to houses as buyers with existing equity in property are targeted. The percentage of builds being two bedroom flats has dropped from around 35% in 2006 to approximately 10% in 2012. The number of two bedroom houses has risen over the same period from around 7.5% to 12.5%. Around 40% of all new builds are three bedroom houses.
The amount of building across the country differ drastically. There has been a concentration of new builds in London and the South East where prices are recovering better than in other areas. Currently one in every three new homes is being built in Southern England.
As part of its strategy to kick-start the economy, the Government has introduced several initiatives to stimulate demand. These include shared equity schemes such as FirstBuy. However, other initiatives, such as NewBuy, have tried a different approach with indemnity-based support.
The Hometrack study suggests that NewBuy may be limited in its effectiveness due to its cost. The mortgage rates for NewBuy mortgages are averaging 1.5% higher than a typical loan. In London the scheme is most cost effective, but even in this area using a 95% NewBuy mortgage is more expensive than privately renting. In areas such as the South East NewBuy mortgages can be £50 per week more than renting.
As the cost of renting continues to rise in London the NewBuy scheme becomes a more attractive and affordable option to those looking to buy their own home. However, it remains to be seen if the extra cost of the scheme elsewhere in the country will limit the take-up.
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