UK Housebuilding Marches Ahead, Despite Crisis
New data indicates that UK housebuilding is pushing ahead strongly, despite significant pandemic-related headwinds. Property construction, according to the Ministry of Housing, Communities and Local Government, expanded in the last quarter of 2020, even with severe lockdown restrictions in place towards the end of the year.
According to the figures, there were 46,950 new houses completed between October and December last year and more than 42,110 starts – the latest data available. This evidence suggests that UK housebuilding is at its highest level since the end of 2007, the eve of the financial crisis.
The capital saw the biggest rise in house building starts, up more than 11 per cent since the final quarter of 2019. London is benefitting from eased planning applications and new building techniques that are allowing builders to construct attractive four-to-ten storey apartment complexes at a lower cost. According to the prime minister, Boris Johnson, the fervour of property construction is allowing the country to “level up” and make owning a property more affordable. It is also providing valuable employment in the construction sector – an area of the economy usually hardest hit by recessions and contractions in demand.
The spring budget outlines why new build houses are a good choice for both individuals and the country. Tax incentives, for instance, are making it easier for construction companies to invest in more capital and equipment. Firms in the sector can now cut their tax bill by 25 pence for every pound they spend on investment. The hope is that this approach will encourage companies to begin new projects and add additional housing at a faster clip than they are currently doing.
Individuals, the government says, will also benefit from the flurry of new home construction. Modern houses have improved energy ratings, better smart technology integration and fewer maintenance costs to consider.
Looking To The Future
According to industry insiders, how well the construction sector fares depends on the recovery of the entire economy long-term. Many commentators expect that demand will slack off and both firms and households attempt to pay off higher debts, though this is by no means guaranteed. The pandemic could actually represent a once-in-a-lifetime productivity catalyst that raises wages over the coming decade.
What’s more, despite the pandemic, the housing market remained surprisingly busy. The lack of spending on hospitality freed up income for other sectors of the economy, without really bogging down aggregate demand. Most of the jobs lost were low-income, and so the hit to the circular flow has been surprisingly small.
What’s more, the construction industry was able to adapt quickly to the challenges of lockdowns and social distancing restrictions. Within weeks, the sector began investing heavily in portaloos and other measures to keep workers safe. And, later, public health officials agreed that construction work did not pose a serious health hazard to employees or others in the community.
Despite the headwinds, therefore, it looks like the industry is going to hit the government target of 300,000 homes per year by 2025. That should help to bring down the cost of buying a new home in the future.
