The drivers of price, demand for house purchases and the supply of available stock are rarely unpicked in equal measure in press coverage of the housing crisis. Growth in total stock and the supply of housing for sale is often neglected.
At a glance:
- Despite house prices now having exceeded the 2007 peak in nominal terms, transaction volumes remain c. 40% below peak levels. The market is still well below its cyclical peak…
- … however, strong volume growth in 2013 suggests the beginnings of a fuller recovery
- Although existing housing transactions have partially recovered since 2009, there has been very little rebound in new build transactions which currently remain at 2009 levels
- New build activity is not well correlated with rising prices. Growth in prices does not generally flow through to an observable growth in building activity due to land constraints and other factors at play, suggesting scope for further value growth in the market
- Significant growth in price in London/South East can be partially explained by a lack of growth in new build stock. As land becomes more scarce, new build growth has been shifting further from London
- The recovery is undoubtedly being led by the premium end of the market, where transaction volumes have exceeded their 2007 peak already…
- … but premium properties account for a very small share of the overall market and with a strong regional bias in London in particular
- Despite this, the average price of new build houses in 2013 was no higher than for existing houses, suggesting that house builders are not able to fully take advantage of the recovery in prime because of scarce land in the most desirable areas
We present some key insights to support these insights in our ‘The UK housing market’ study.