The housebuilding market has performed well in recent years with 2016/17 representing a fourth successive year of growth following the start of the recovery in the housebuilding sector after the last recession. This growth has largely been driven by increasing activity levels in the private housing sector, underpinned by a combination of low interest rates, competitive mortgage deals and especially the Help to Buy equity loan scheme.
Average selling prices have also been increasing year on year over the same period, contributing towards strong growth in total contractors output, which nearly doubled between 2011/12 and 2017/18. The key reason for this strong growth has been a marked shift away from 1-3 bedroom flats towards higher value 4+ bedroom detached and semi-detached homes, particularly across London, the South East and East of England.
However, most other regions of the UK have also been affected by price increases, albeit to a lesser degree. While interest rates remain on the lower side, mortgage deals are likely to remain competitive although interest rate rises could easily reverse growth in the market. Affordability will therefore continue to be a key factor in sustaining demand, with the extension of Help to Buy equity loans in England through to 2021 expected to underpin demand for private sector new housing.
Partly due to high housing prices, the other notable trend has been a change in the mix in tenure, with a fall in home ownership and an increase in private rental and a decline in social rent, to be replaced by a rise in the levels of affordable rent. This decline in social rent has been brought about by government cuts to social housing providers capital budgets. This in turn has compelled the latter to shift their sources of funding towards affordable rent and open market sales, which in turn contributes towards funding new developments.