Even though the average number of new homes built each year is increasing, the current levels are not promising. The average each year from 2005/06 to 2017/18 was only 177,000, but that rose in the 2017/18 financial year to 220,000.
While that number is still significant, it does not look like this growth can be sustained into the future. The report notes several causes for this; firstly, more needs to be done by the Ministry of Housing, Communities and Local Government to create an implementation plan to scale-up building; secondly, local authorities must be given more support to produce local plans showing how many new homes can be built in their areas, and where these homes should be located; thirdly, the report states that the supporting infrastructure for these new homes is not in place and will require significant public and private investment.
The report also states concerns with the quality of many new-build homes and expresses worry that the government and local authorities are not clamping down on poorly built new homes.
Committee chair, Meg Hillier MP, commented: “Progress against the government’s annual new house building target is way off track and currently shows scant chance of being achieved.
“The government has set itself the highly ambitious target of building 300,000 homes a year by the mid-2020s – levels not seen since World War Two – even though there is no clear rationale for this figure and the ministry themselves say only 265,000 new homes a year are needed.
“Government needs to get a grip and set out a clear plan if it is not to jeopardise these ambitions.”
This verdict, and the figures themselves, seem to go against one of Theresa May’s political legacy claims. Last week the Prime Minister stated that housebuilding has been drastically increased, but it seems like those numbers might not reflect reality.
If, as seems the case, there are nowhere near enough homes being built, what does this mean for the UK buy to let market?
Put simply, it means more people will be renting in the long term as confirmed by the latest Zoopla UK Cities House Price Index. According to the report, the average income required for a first-time buyer to get on the property ladder has climbed to £54,4000 – an increase of more than £4,500 in three years. Given that wages have not grown appreciably over this period, that means a decreasing number of people can afford to buy on their own.
The only way to solve this, barring massive unforeseen wage growth, is to build more homes. No other schemes or ideas to increase supply to the market can beat simply building homes at an increased rate and overtaking the growth of demand. Given that the aforementioned report from House of Commons Public Accounts Committee shows that this isn’t going to happen, we can safely assume that supply will not increase beyond demand.
This means that the Private Rented Sector (PRS) is likely to grow indefinitely. Not only are more people having to rent in the long-term, but more people are entering the market each year on top of that. As more pressure is put on the PRS, rents are likely to continue increasing as they have done for a long time – making this a perfect time to invest in the UK buy to let market.
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