SUMMARY OF REPORT CONTENTS

Overall housing completions have increased steadily in recent years, but are still only around 200,000 dwellings, despite the Government’s targets to increase the number of houses built to address the current serious housing shortage. Preliminary estimates of the number of housing completions in 2007, however, are indicating a decline, reflecting the first downturn in house prices for over a decade.

There has been a significant rise in the percentage of apartments built in recent years, which are now estimated to account for around 48% of newbuild homes – a share that has doubled in just 5 years. Factors influencing this growth have included rising land costs, planning pressures to increase housing densities, an emphasis on affordable housing, growth of the buy-to-let market, a growing niche market for retirement homes and an increase in single person households.

In parallel, there has also been a rise in mixed use developments on brownfield sites, incorporating significant residential schemes. This has contributed to the growth in apartment building and has stimulated greater competition within the housebuilding industry as property developers and construction companies specifically target these projects.

In the short-term, 2008 is likely to prove a difficult year for the housebuilding industry in general, and the flats sector in particular. Output levels were falling in late 2007 as a result of the downturn in house prices and consumer confidence, and this is forecast to continue in 2008. In addition, the buy-to-let market, which has been a major driving factor for the building of large-scale city-centre apartment developments, has slowed considerably and suggests that the share of flats has peaked  - at least in the short term.

However, it is clear that housing completions must rise over the medium term. Gordon Brown has already announced that he is committed to increasing housing supply, with particular emphasis on affordable housing where current volumes are clearly substantially below market demand. Mixed use developments on brownfield land should continue to increase, with commercial developers expected to develop an increasing number of residential units themselves, while the lack of development land in England, in general, will underpin the building of flats.

In the longer term, the supply of flats will ultimately be driven by housing density issues and ythe level of Government investment in affordable housing. While current industry supply is primarily focused on private sector mid-upper priced dwellings, demand is increasingly driven by low-cost social / affordable housing needs and this mis-match will need to be addressed relatively soon.

AMA Research’s “Flats and Apartments Market UK 2008-2012” report is available in hard copy or electronic format for £625 and can be ordered online at www.amaresearch.co.uk or by calling 0871 3103450.