The credit crunch has had a huge impact on building of new homes, recent reports suggest only 100,000 homes will be completed in 2009. Worse still is the lead time to build homes, this includes land acquisition, planning permission, and construction, from start to finish this can take several years. The result is that when the economy does recover and house building ramps up, it will be some time, possibly 2 to 3 years before sufficient numbers of new build homes are completed.
Some people may say that this is not such an issue as we already have spare housing capacity, this is true today, but the fact is the UK population is growing every year.
Recently published figures by the UK Government forecast a population growth of around 1% per year over the next decade. And 1% of UK population is around 600,000 people each year, assuming an average of 3 people per home that requires 200,000 new homes each year, double the number currently being completed.
But the future shortage of homes could be much worse, for example much of the new housing completed in recent years has been flats. This has created an imbalance suggesting whilst there will be an increased demand for all housing it could see a more acute shortage of houses.
So when will we start to see the effects of the housing shortage? The best guess is shortly after the economy recovers, so probably from 2011. The effect could see a higher rate of inflation in houses (compared with flats) from 2011 onward.
