The UK housing market and how small developers are not to blame

Blog Post: Understanding the Challenges in the UK Housing Market

Hello everyone, Robin Hayhurst here. Recently, I found myself at the centre of a heated discussion on Facebook where someone blamed me for the high house prices. This incident made me realise how little people understand about the intricacies of the property industry, planning, and contracting. So, I decided to write this blog to shed some light on these topics.

The State of the Housing Market

Currently, the UK builds around 250,000 houses annually, but we need closer to 400,000 to meet demand. The shortfall is due to two main reasons: a broken planning system and a lack of capacity to build more homes.

The Planning System

The planning system in the UK is notoriously complex and expensive. Small developers, in particular, struggle to navigate it. They often can't afford to buy land outright and must take legal options on land while awaiting planning permission. This process involves numerous studies and answering a myriad of questions, making it a costly and time-consuming endeavour.Moreover, the planning system is not user-friendly. It's difficult to predict whether a project will get approved, and the process can be prohibitively expensive. This complexity has led to the decline of small house builders, with larger companies dominating the market.

Community Resistance

Another significant challenge is the "Not In My Backyard" (NIMBY) attitude prevalent in many communities. People often oppose new developments, fearing change. While I understand this sentiment, it can hinder progress. Interestingly, once projects are completed, many people see the benefits, such as increased property values and improved community amenities.

The Building Side

The construction industry also faces significant challenges. Brexit has exacerbated labour shortages, making it difficult to find skilled workers. This shortage, combined with rising material costs, has made it harder for small developers to make a profit.

Misconceptions About House Prices

During the Facebook debate, someone accused small developers of inflating house prices. This is a common misconception. In reality, the market sets house prices based on supply and demand. Most people in the UK (about 70%) own their homes, and an oversupply of new homes could lead to a decrease in property values, affecting people's primary assets.

The Balancing Act

Governments face a delicate balancing act. We need to build more houses to meet demand, but not so many that it destabilises the market. The goal is to maintain a stable, buoyant market where house prices rise moderately, ensuring that people's investments remain secure.

Potential Solutions

One way to address the housing shortage is to repurpose unused buildings, such as converting office spaces into residential units. However, achieving the right balance of supply and demand remains a complex issue.

Conclusion

In conclusion, the housing market is a complex ecosystem influenced by various factors, including planning regulations, community attitudes, labour availability, and market dynamics. Understanding these factors is crucial for anyone involved in the property industry. I hope this blog helps clarify some of the misconceptions and challenges we face.