New Home Building Decreases As Mortgage Rates Rise
17 May 2008 / by Rebecca Sargent
The number of new homes being built in the UK has fallen significantly in the first quarter of 2008.
According to Government statistics released yesterday, house building activity has declined by almost a quarter year-on-year. The Department for Communities and Local Government said that just 32,100 houses were built in the first quarter of 2008, a fall of 21 per cent compared with the previous quarter.
According to the statistics, annual housing completions in England totalled 156,400 in 2007-2008, slightly down on completions in 2006-2007. The Government’s 2007 Comprehensive Spending Review target was to increase the number of new homes built each year to 240,000 by 2016. This target looks set to fail as the house building market suffers during the credit crisis.
In response to the figures, David Stubbs, senior economist at the Royal Institute of Chartered Surveyors (RICS) told the Financial Times: “Given the ongoing problems in the mortgage market and a weakening economy, the decline in house building will surely continue.”
The Government statistics coincide with interim management statements from building companies Redrow and Barratt Developments, which have both been forced to admit a fall in profits and the possibility of job losses. As mortgage rates rise and availability falls it is inevitable that the house building sector will suffer as no one can get a loan to buy.
Commenting on the current market, executive chair of the House Building Federation, Stewart Baseley, said: “These figures are further evidence of the deterioration in the housing market. Whilst yesterday’s announcements were welcomed, they do not go far enough and if further action is not taken and taken quickly, in addition to the immediate threat to jobs then the Government’s long term housing targets are in jeopardy.”
In response to falling sales and completions, Barratt Developments have tapped into the potential goldmine of eco-friendly homes. The first Barratt Green House – the first home by a mainstream house builder that is so environmentally friendly that it meets the criteria for zero stamp duty – was opened yesterday by Housing Minister Caroline Flint.
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