Whilst houses rather than apartments are more popular with homebuyers, government restraints on homebuilders mean that the industry is forced to build smaller units. As a result, the new homes market is seeing prices decreasing more than the wider market as a surplus of cheaper apartments drags down average prices.
Year of decline
SmartNewHomes.com’s monthly New Homes Report shows the average price of a new home in November was £255,751, down 4.8 per cent on the same time last year. The report shows that, aside from a slight recovery over the summer months, the UK housing market has been in decline for over a year. Although month-on-month prices recorded a marginal increase of +0.2 per cent, quarterly figures, more indicative of longer-term trends in the market, show a continuing slowdown with prices down by 2.4 per cent.
Apartments dominating
Of the new homes currently available in the UK, over half (54.7 per cent) are apartments compared to less than a third (30 per cent) of detached homes. This has been a sharp shift from three years ago when apartments formed just 33 per cent of new home stock with detached homes dominating at 48 per cent.
At the same time, apartments have seen the sharpest drop in prices in the last two years, with average prices falling by 15 per cent since 2003 compared to a decrease in the average market price of just 5 per cent.
David Bexon, managing director of SmartNewHomes.com, commented: “These figures make it clear that there is currently a surplus of apartments on the market and this is having a negative effect on average prices. The shape of the new homes market has changed drastically over the last few years as a result of the Government’s limitations on homebuilders’ activity. With limited greenfield sites made available for development and tight constraints on housing density, homebuilders have been forced to adjust their mix of property types but demand has not shifted in the same way. Homebuyers still prefer detached and semi-detached properties for family and starter homes but there is distinct shortage of these on the market."
He added: “The Government has acknowledged through the Barker Review of Housing Supply that a great number more homes are required to meet the increasing demand from new households and in the Pre-Budget report this week it was stated that there will be further overhaul of planning regulations. However immediate action is required to allow and incentivise homebuilders to build the properties that homebuyers are demanding in the areas they want them in.
“Oversupply is a real issue and the is down to the government. The Chancellor has made his pledges in the Pre-Budget report this week and it is now time to deliver.”
