The scarcity of housing in the UK is a well-established theme that has underpinned market performance and Government policy. Past household formation in England has fallen short of projections, limited by the availability and affordability of housing.
Nevertheless, the household projections indicate that potentially realisable new housing requirements are likely to be in excess of past rates of household formation, which have been around 195,000 per annum during the last five years.
Even the low migration projections produced by ONS indicate additional household numbers of around 245,000 per annum.
Housing supply consists of more than new build homes, as it also comprises conversions of houses into flats, change of use from commercial property and the return to use of long-term empty homes, after refurbishment.
These sources have added an average of 37,000 homes per annum to England’s housing during the last 10 years.
More than new build
Looking forward, we expect new housing completions to rise to 125,000 per annum in 2016, as market transaction levels improve slowly and the Government’s Housing Strategy measures take effect, offset by the reduced levels of affordable housing that can be expected within the new funding programme.
We have pencilled in an extra 20,000 new homes from the recently launched NewBuy mortgage indemnity programme, offset by the end of FirstBuy equity loans which are set to deliver 10,000 homes in 2011/12.
Adding in conversions and refurbishments takes supply to an annual average of 152,000 homes over the next five years. This leaves an annual shortfall of at least 43,000 homes plus the pent up demand that has been constrained by the availability and pricing of housing.
The vacancy rate of long-term homes is an indicator of how this overall housing scarcity plays out at a local level. It varies from less than 0.75% of housing stock in parts of London and the south to more than 1.75% of stock in parts of the north.
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