Summary

This research presents the results of a survey of senior housebuilding managers, social housing providers and industry experts to gather views on what issues, if unaddressed, may constrain housing supply.

It canvassed views on:

• The current state of the industry;
• Barriers to housebuilding growth;
• Potential future changes in the industry, once the recovery is underway;
• The likely impact of recent government policy developments; and
• Issues that would benefit from further in-depth research.

Background

The fifth anniversary of the onset of the downturn in the housing market will occur in 2012, with market prospects looking poor.

• At the international level, the decline in the UK housing market has now been amongst the worst.
• UK house prices in 2011 passed the symbolic benchmark of having fallen by a third in real terms since their 2007 peak.
• With regard to housebuilding, this downswing is already the deepest in peacetime for well over a hundred years and it is on the way to turning into the longest. Housebuilding is at only half of its pre-crisis level and there is no sign of a significant revival.
• The housebuilding industry is a flexible one and capable of coping with sudden large increases in demand. However, demand is currently depressed; buildable land in short supply, despite the downturn, because of planning constraints; and regulation threatens to raise costs and limit site viability.

Findings

This survey was undertaken ahead of the announcement of certain recent government initiatives, such as the Mortgage Indemnity Guarantee Scheme (MIG).  However, it is considered that, whilst those announcements, and particularly the MIG, are welcome, the pessimistic picture of an industry still struggling to recover is unlikely to be materially altered.
Key messages from the survey are as follows:

• Recovery from the downturn is slow and will remain so;
• Output will fall in 2012 and will still be almost 30% less than the previous 2007 peak in 2016;
• The major barriers to extra housing supply concern finance and the planning system;
• Localism in relation to both planning and building standards is a cause for concern;
• Regulation and bureaucracy remain a source of frustration;
• Firms and social builders are changing their strategies in response to the downturn;
• Industry consolidation is anticipated in both private and social sectors;
• Industry’s impact on policy debate could be strengthened, particularly at the local level; and
• There is strong support for more independent, impartial research on housing supply issues.
   

Conclusions

The survey highlights that housing supply remains in crisis.  It highlights that there is a widespread feeling that more could be done to stimulate demand and to create conditions whereby the housebuilding industry could get on with its job of providing new homes at affordable prices.  Additional research would help in that endeavour and highlight the ways in which housing shortages damage the economy and people’s lives.

The survey was undertaken in late 2011.  Prospects improved somewhat in the early weeks of 2012, but the general sense of an industry in need of a helping hand remains.  At the same time, evidence of the deleterious effects of a lack of housing supply continues to grow.