Decline in House Building Volume

Brexit has affected the property market in terms of declining purchase volumes. This is notable particularly from the domestic market with negative sentiment and generally cautious British nature has meant that local buyers have adopted a ‘wait and see’ policy.

The free movement of people is a pillar of the European Union. There is the concern that restrictive UK migration policies may result is a lower number of highly skilled migrant workers. This could impact on construction costs, which have already increased as a result of the falling pound.

Developers are already experiencing a skills shortage which is driving up build costs. If developers reduce the volume of new starts due to poor sentiment and rising costs, this could exacerbate the housing crisis and the result is further rises in UK property prices.

Population growth

In 2002, one of the members of the Bank of England’s monetary policy committee, an economist named Kate Barker, conducted a housing market review. Her report concluded that 250,000 new homes should be built each year. Back in 2002, the net inward migration was 260,000 where as it peaked in at 336,000 in 2015. When new births and deaths are factored in, the net annual population growth is hovering around 500,000 per annum. It is easy to see the correlation between the house price growth and population growth graphs.

Government help to stimulate

The Chancellor of the Exchequer (Minister of Finance) Philip Hammond confirmed in his autumn statement that the government will invest a generous £1.4 billion in 40,000 affordable homes. This would be good for housing supply however – as is often the case with government plans – there is a difference between policy and what is realistically implemented. It may be difficult is practically achieving their target because builders are profit motivated.

Generation of renters

In today’s fast moving and transient society, the trend amongst those in their twenties has been a shift in attitudes towards property ownership. Millennials are more focused on usability rather than ownership. They are more keen to have properties that meet their lifestyle and career mobility in the global village rather than being bogged down by a mortgage.

Low wage inflation and rising house prices have resulted in an affordability problem. Earnings multiples are at all record levels with the average house price being more than six time earnings (in the South East of England) according to Santander Bank.