In PropTrack’s latest update, Eleanor Creagh (pictured above), senior economist, discussed the ongoing housing shortage, emphasising that while easing planning restrictions is helpful, it doesn’t tackle the full scope of issues currently plaguing the housing market.
“Easing planning restrictions isn’t the only problem that needs to be addressed to solve housing shortages,” Creagh said.
The shortage of housing has had a significant effect on the residential market, with prices for existing homes and rents both surging since the pandemic began.
“The residential construction industry has been challenged by capacity constraints and higher costs, and consequent tight housing supply is flowing through to both prices for existing homes and the rental market,” Creagh said.
Renters are particularly hard-hit, with vacancy rates near record lows and rents up by more than 40% across urban and regional areas.
See LinkedIn post here.
Despite approvals for new construction, a substantial number of projects have not commenced due to high input costs and other economic pressures.
“At present, close to one in five approved homes are not flowing through to completions, which is a bigger drop off than has been seen throughout the past decade,” Creagh said.
She highlighted that the feasibility of new projects is often compromised by increased costs, which are squeezing potential returns for developers.
The current rate of building new homes is significantly below the levels needed to meet future housing demands.
Creagh pointed out the stark shortfall: “We’re currently completing just under 170,000 new homes a year and commencing even fewer, which is below the prior decade average.”
To reach the necessary goals, an almost double increase in building activity is required, a daunting task given the existing constraints.
Creagh advocated for comprehensive measures to boost construction activity and address the immediate challenges. These include incentivising new builds, addressing labour shortages through targeted migration policies, and adopting innovative construction techniques.
“Addressing these more immediate issues hindering the expansion of housing supply could facilitate a faster supply increase and help put the brakes on the housing crisis,” she said.
Get the hottest and freshest mortgage news delivered right into your inbox. Subscribe now to our FREE daily newsletter.
