House building forecast to rise 55% over next five years
Developers across all sectors are set to increase their output to 167,000 new homes a year by 2018, supported by a steep rise in output from the public sector, according to new forecasts from international real estate adviser. This is still short of the 240,000 a year required to meet need in England, but a 55% rise on the 108,000 2013 total.
As the housing recovery takes root and spreads to markets beyond London, the firm expects house building rates to gain momentum in 2014, with housing associations and, to a lesser extent, local authorities playing an increasing role in delivery.
The private sector is forecast to increase production by 8% a year in the five years to March 2018 – a total increase of 35% over the period. This would result in an average output from private house builders of 107,000 new homes a year over the next five years, according to Savills research.
Susan Emmett, Savills director of residential research, said: “Historically, we have seen periods of similar growth in the 1980s and noughties but there is no precedent for faster growth over a sustained period. Our forecast is therefore the best case scenario for private sector expansion and very much dependent on finance easing for SMEs.
“Indeed, we have made some robust assumptions about increase in output from both the private and public sector. It is worrying that even a best case scenario is still not good enough to meet our housing need.”
Even by increasing output to 107,000 new homes a year, private house builders would still be producing far less than the 203,320 they delivered in 1968 when construction peaked. They would also be building less than the 2007 total of 154,210.
Susan continued: “Other players must therefore step up to close the gap between what can realistically be delivered by the private sector and our growing need for housing. Judging from the increase in activity among our local authority client base, we anticipate greater output from the public sector.”
Savills research forecast assumes incremental growth in the number of homes delivered by local authorities, increasing from 1,665 this year to 10,000 in 2018.
Housing associations are also expected to increase output. Provided the sector can meet the tight deadline to deliver the 2011-15 programme numbers by March 2015, housing associations are set to deliver 26,000 new homes in 2014 and 34,000 in 2015, up from 22,000 completions in 2013.
Furthermore, continued development at high levels will be needed for the ambitious 2015-2018 programme to be delivered. By 2018 Savills expects housing associations to account for a fifth of total new build delivery.
Susan also commented: “As the economy improves a lot of new supply from the private sector will be aimed at market sale. However, bolstering the private rented sector with higher quality housing at market rents will be key to providing the levels of housing the country needs.”
Overall, Savills expects to see 119,000 completions in 2014, rising to 167,000 a year by 2018. Whilst, this is an improvement, it is still short of the 240,000 new homes a year needed to meet housing need, they say.
Summing up, Susan said: “It is crucial that that building numbers continue to grow. The burden of meeting the country’s growing housing need cannot be placed on the private sector alone. Encouraging a greater variety of players to deliver new homes, as well as promoting different routes to market, such as build to rent, would be a great step forward.”
