Warning on house building targets

Posted by bowraven on 8 June, 2008 under Business news, Credit crunch | Be the First to Comment

Ministers are “very unlikely” to achieve housing targets, the UK’s chief advisor on home building has warned.

Professor Stephen Nickell said that, unless conditions change, the target of three million new homes in England by 2020 will not be met.

To get to this target, the housing industry needs to be building 240,000 homes a year, a figure that few think they will achieve this year.

The industry is already behind in its construction targets.

Just over 200,000 new homes were built last year.

Priced out

Homebuilders have cut back new building this year as a lack of mortgage products and falling house prices have cut demand.

Mr Nickell, who heads the National Housing and Planning Advice Unit, believes that alongside the financial constraints local authorities are also holding up new house building.

“The wealthier people in society can satisfy their housing demands, more or less, as they get richer” Professor Stephen Nickell

“Unless local authorities are given a strong incentive to allow house building in their locality, it seems to me very unlikely that we will hit the housing targets,” he said.

“And if you don’t keep building these houses the prices just keep going up relative to people’s incomes.”

Government figures published recently showed that new housing work was down 5% in the first quarter of this year compared with the same period in 2007.

The Home Builders Federation, which represents major house builders, said that new building work did not show any signs of picking up.

“Right now the credit crunch is stopping people from getting the finance that people need to buy homes,” said John Slaughter, director of external affairs at the Federation.

“Longer term we need a better business environment and less regulatory cost to get the industry moving.”

The big building companies are beginning to show the strain with rumours that they may have to raise new capital to survive.

The two giants of the industry, Taylor Wimpey and Barratt Developments, carry a total of more than £2.5 billion of debt.

That equates to more than double their combined market worth.

The financial pain being felt by the companies has already forced one of them, Persimmon, to put a halt on all new building projects.

Falling prices

Figures from the Nationwide this month showed a 2.5% drop in house prices in May, with some predicting a 20% drop by the end of 2008.

But despite falling house prices, Professor Nickell said the current situation seemed to be only benefiting the richer parts of society.

“The wealthier people in society can satisfy their housing demands, more or less, as they get richer. While the rest of us get squashed into smaller and smaller houses.” he said.

And he added that if present trends continue, things are looking bleak for the future of housing in England.

“If the present situation continues we will be less well housed than the majority of people in Europe, Australia or the United States,” he said.

News reported by BBC