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UK faces property crunch as demand for homes outstrips supply

·3-min read
UK faces property crunch as demand for homes outstrips supply
The government said the decrease in new homes being built may be due, in part, to the COVID-19 restrictions introduced during spring 2020. Photo: Luke MacGregor/Reuters

New figures from the government have brought to light the stark lack of new homes being built in the UK, as data showed that stock shrank 11% in 2020-2021 from the previous year to 216,490.

Net additional dwellings is the primary and most comprehensive measure of housing supply in the UK.

The 216,490 net additions in 2020-21 resulted from 194,060 new build homes, 23,790 gains from change of use between non-domestic and residential, 3,870 from conversions between houses and flats and 530 other gains (caravans, house boats etc.), offset by 5,760 demolitions.

Net additional dwellings had reached a previous peak of 223,530 before the financial crisis in 2007-08 and then decreased to 124,720 in 2012-13 with the economic downturn.

Since then, net additions had increased to a peak of 242,700 in 2019-20. The most recent reading is the lowest level for 5 years.

Read more: UK mortgage deposit soars to 110% of average pay

The government said the decrease may be due, in part, to the COVID-19 restrictions introduced during spring 2020. The current level is 3% below the previous 2007-08 peak and 74% above the trough in 2012-13.

The 216,490 net additional dwellings in 2020-21 represents an increase of 1% on the previous dwelling stock estimate of 24.7 million dwellings in England as of 31 March 2020.

"The lack of housing supply has been an issue for decades, and while the government has offered help to both developers and buyers, its attempt to fix the issue borders on the pathetic," said Doug Miller, director at Bath-based independent mortgage broker, Lansdown Financial Services.

"The simple economic principle of supply and demand should not be beyond the academic intelligence of our country's leaders, and until they put measures and greater incentives in place for developers, the deficit of new homes will only increase."

The figures come in tandem with a cooling housing market following the end of the stamp duty holiday.

Data released by HMRC on Tuesday showed that month-on-month, home sales in the UK more than halved in October, with 76,930 residential transactions taking place.

Read more: UK home sales halve in October as market put on ice

The 52% dip reflects a cooling housing market, following months of high turnover as stamp duty was waived to support the market during COVID-19 lockdowns. Overall, the market saw the slowest October since 2012.

The slowing market didn't stop house prices rising again in October. According to Rightmove the average UK house rose in price by £5,983 ($8,027), jumping by 1.8%.

This was the highest percentage monthly rise at this time of year since October 2015 and the first time since March 2007 that Rightmove has recorded a "full house", with all market sectors and all regions of Britain having hit new record price highs in the same month.

Watch: How much money do I need to buy a house?