Despite a rise in the number of new houses being built in the UK there has not been a drop in the prices - people are paying more than ever to get onto the property ladder.

Figures released by the Department for Communities and Local Government this week showed that housing completions in England in the first three months of 2006 were 42,522.

This represented a rise for the second quarter in a row and now paints a picture of the highest house building levels seen in the country since 1989.

Government schemes to reclaim brown field sites and boost the housing numbers have contributed to the rise, while increasing numbers of people wanting to live in their own homes across the UK has fuelled the demand.

The new figures represent a 13 per cent increase when compared to the same period in 2005 and are also 31 per cent higher than the most recent low point for the number of houses being built back in the second quarter of 2001.

The number of new houses built in 2005 totalled 159,000 and if the positive first quarter results for this year continue throughout 2006 around 170,000 homes could be built come Christmas time.

But despite the fast pace of the construction industry, there is still not enough property to go around it seems, according to RICS economist David Stubbs. The problem has stemmed from increased demand but also from very low levels of building activity ? the government estimates household formation will show an average increase of 209,000 properties up to 2026.

Although house building levels have risen by six per cent since the 2001 trough, RICS estimates that building levels will not match demand until at least 2010 which would serve to slow the process as a greater backlog is built up.

Another upshot of the massive demand for property is a shift in the type of properties companies are building for people to inhabit. Many of the current increases have come about by shifting the composition of new homes towards flats. In 2004/2005 flats made up 41 per cent of all new homes built which is twice as much as the figures five years earlier.

So while RICS welcomed the positive figures it feels they will only dent the UK housing imbalance, which will mean as demand remains strong house prices will continue to grow.
thanks
sean

I would agree. Supply is really pretty limited in the UK and its other factors that will drive a change in the direction of the market.

a good time for investment in residential new builds then...

Yes, we are grossly under-supplied in UK housing stock. Ironically, we are over-supplied in city centre new build! "How can this be?", I hear you cry! The truth is that many new build developments of 100+ units carry unsold units. Even with good deals to be done with developers on the price of new-build apartments, I would caution investors to question whether rental prices (driven down by such over-supply) and over-inflated valuations on much city centre stock justify such an investment.

Far better to buy traditional terraced stock in nearby suburbs of these same cities. Traditional stock appeals to a wider variety of tenants, and, when temperatures rise (with global warming) us Brits love to get out into the garden with the BBQ and a bottle of plonk. For anyone who's tried entertaining on an apartment's small balcony, you'll know what I mean.

If you really are set on off-plan investments, buy in smaller apartment blocks in university towns and avoid regional capital cities.

Don't forget that repossessions will be on the rise and they will present investors with opportunities to buy at deflated prices.

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Michele Andrew
Editor of Square Foot Magazine

People are just scared at the moment. Terrisoum, Food illness, money. Its crazy!

Now people have choice, but price still same in london city.

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Barbican Property | Property Bloomsbury | Property Limehouse | Estate Agents Clerkenwell

Where can I find repossessions?

Michelle

Couldn't agree more, we are currently launching a UK Recovery Fund targeting repossessions and there is a huge appetite for this amongst investors. On a cautionary note even with picking up properties at below market value it is still difficult for the rental income to cover the mortgage.

If targeting repossessions make sure you deal with banks and insolvency practitioners and not directly with the seller as this could leave you open to litigation in the future.

Tony