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Conservative Govt unlikely to ease housing supply fears

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A new Conservative Government is unlikely to ease concerns over the supply of housing, with experts pointing to continued constraints on resources and local planning departments.

Property consultancy Knight Frank published a survey of over 160 housebuilders last month suggesting just 9 per cent believe more than 200,000 homes represents a sustainable level of housebuilding.

The figures came ahead of an election which had seen both Labour and the Liberal Democrats pledge to build at least 200,000 homes on an annual basis, while the Conservatives demurred from targets beyond promising to build the same number of houses for first-time buyers over the course of the next parliament.

However, housing delivery has not topped 200,000 since 2007, or the Lib Dem goal of 300,000 since 1976.

“Private developers have been relatively stable, it’s local authority building that’s totally fallen away, and the onus really has fallen on private developers to deliver affordable housing,” explains Knight Frank’s UK residential research head Grainne Gilmore.

“There’s opportunity there, but there has been a structural change in the delivery of the housing market.”

Knight Frank also found that 60 per cent of housebuilders expect housing completions to rise over the next year, with almost a fifth of respondents saying the rise could be as much as 25 per cent.

However, they also said that there will likely be no change in delivery of affordable homes.

The surprise election of the Conservative majority Government last week will have little impact on the potential for housebuilding, adds Gilmore.

Knight Frank quizzed developers and housebuilders on their expectations “under current conditions”, but Gilmore says the Conservative plans lack sufficient differentiation to change the picture.

“Under the Conservatives those conditions will not change much. Their manifesto suggests they will simply sustain existing levels of housebuilding,” she says.

While more than 90 per cent of respondents told Knight Frank that construction costs are expected to rise over the next 12 months, the most widely cited roadblock to further construction was resources for local planning departments, with developers asking for faster decisions and fewer appeals on decisions.

Gilmore says: “What we saw clearly was that there was a lot of ideas about what could be done to speed up the process. These are the things that they are bumping up against and they are keen for things to improve.”

Capital Economics chief property economist Ed Stansfield says part of the problem is that while the coalition government has made some headway in improving planning, it has also been guilty of “tinkering”.

“There’s no reason why if you give the sector a stable planning environment that is not in constant revolution that house builders can’t deliver any number of homes,” he says.

“But I do think this idea that you need 200,000 homes a year is taken as gospel, when in reality it’s anything but.”

Capital Economics recently published its own research asking whether high construction costs have impacted the number of homes delivered. The consultant forecasts a gradual recovery of house building this year following two consecutive quarters of negative annual growth in 2014.

Stansfield says: “What will really ensure a steady production of homes is a steady demand for them – allowing construction workers to keep their skills and materials producers to remain in business. That argues against temporary policies to boost demand, and for a reduction in tinkering.

“That will remain an issue until we get some braver politicians in parliament.”

Hometrack director of research analysts Richard Donnell says while the mooted extension of Help to Buy policies will further stoke demand, the state of the UK’s housing recovery should not be overstated.

He says: “It’s a bit one dimensional at the moment, and it’s driven by people with a bit of equity, good credit scores and access to affordable debt.

“Most house builders are either buying land in the market or drawing it from their land banks. But if they could get more land by paying on instalments as they build then they could also build more.”

Donnell adds that developers are also hoping a recent devolution deal for housing in Manchester can be replicated elsewhere.

The deal, reached in November last year as part of Chancellor George Osborne’s “northern powerhouse” drive, gave Greater Manchester control of a new housing investment fund of up to £300m to deliver an additional 15,000 homes across the city over a 10-year period.

While the Conservatives have declined to offer an outright housing construction target, they pledged in their manifesto to support locally-led garden cities and towns in places such as Ebbsfleet and Bicester, and to require local authorities to have a register of brownfield sites.

“Government is realising that the question being asked is who is managing the investment in our housing, and that represents a mindset change, but they only get a funding settlement every ten years,” Donnell says.

“Local government wants it to do more, but the Government will need to help it to do more.”

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