Commenting on the latest construction industry output update from the ONS, Stuart Law, CEO of the Assetz group, said:
“While today’s figures show huge potential in the housing market, given complex structural issues including rising costs, shortages of raw materials and labour, and other pandemic related delays to imports, we’re likely to see monthly construction figures bounce around for some time yet, rather than a consistent period of growth.
While the pandemic has dramatically slowed the global supply chain, we can’t shy away from the fact that we are still feeling the substantial impacts of Brexit and we haven’t yet made enough meaningful progress in establishing trade rules favourable to growth. The impacts on the housebuilding sector we’re seeing – rising costs, extra paperwork, and border delay on both goods and labour – were all highlighted by the Public Accounts Committee this week, as ‘the only detectable impact’ of Brexit. That’s obviously not a good place to be in two years on from our withdrawal from the EU. With the Government now talking about ending all Covid restrictions, we need to turn our attention to pulling all available policy levers to improve our ability to trade internationally to maximise growth opportunities as the world opens back up.
We anticipate demand for housing will lead to continued house price growth of around 8-10% this year, supported by cautious interest rate rises which maintain a market driven by low-cost borrowing. This will, to some degree, allow housebuilders to offset high build costs. But, this dynamic is not sustainable long-term. As house prices rise and living costs spiral, more and more aspiring buyers will find they are priced out of the market and at some point, that will hit demand which could create a perfect storm if we haven’t solved the structural issues with our housing market.
The Public Accounts Committee report this week will rightly focus minds on cross-border trade issues, but we also can’t forget the serious challenges housebuilders face at home – rising land prices, inflation and an archaic planning system. As well as supporting competition and diversity in the housing market by better funding SMEs, we need to supplement the support outlined in the Levelling Up whitepaper with radical planning reform to have real impact. We also need to make sure we have as many funding lines available to housebuilders as possible to allow them to finance projects in the face of current market challenges. This means government funding, but also leveraging the expertise of specialist lenders that are already bringing billions of pounds into the market from institutional and retail investors. Ultimately though, lowering build costs so we can build more houses is the only structurally-sound way to balance supply and demand, keep house price growth sustainable and ensure we don’t create a market facing dramatic cycles of boom and bust.”