Good news for property investors – housing starts are way short of demand

housing starts are way short of demand

Property price rise in London and UK cities are smashing inflation, too.

Sometimes I get the feeling that the media are desperately trying to crash the UK property market. Two items of property investment news over the last few days highlight just how media headlines are deliberately misleading. Reporters seem hell-bent on putting a negative spin on their stories.

In this investment news article, I’m going to report the news before telling you the more negative headline that accompanied the news report. It should show you how important it is to always read beyond the headline.

Housing starts in England fall woefully short of demand for new homes

The latest government figures show that housing starts in England have reached their highest level since 2008. A total of 164,960 new build homes were started in the 12 months to June 2017. That’s a huge 13% higher than between June 2015 and June 2016.

However, when looking at the quarterly numbers, new build starts are down 3% in the quarter to June 2017 compared to the previous quarter to March 2017 – the biggest decline was in starts for housing associations, which fell by 19% to 5,280.

Commenting on the numbers, Housing and Planning Minister, Alok Sharma, said:

“It’s vital we maintain this momentum to deliver more quality homes in the places that people want to live. Our housing white paper set out an ambitious package of long-term reforms to do just that.”

The original headline for the reporting of this news was:

“English housing starts reach their highest level since 2008.”

Not exactly awe-inspiring, is it? So why have I rewritten the headline? Because of what the report doesn’t say. For example:

In July 2016, the Department for Communities and Local Government revised its projections of the likely number of households needed in England. The government’s forecast is that 5 million new homes will be needed in the next 25 years.

The government thinks 200,000 new homes are needed every year for the next 25 years – and they are applauding “this momentum to build more quality homes”? 165,000 new home starts every year for the next 25 years would mean a shortfall of at least 875,000 new homes.

So, the rise in the number of new housing starts in England is to be welcomed but means that the supply/demand dynamics that are helping to push property prices and rents higher haven’t changed. In fact, they could serve to put even more upward pressure on prices. And that’s great news for long-term property investors and buy-to-let landlords.

London property prices still rising faster than inflation

House prices in London are up by 2.8% in the last 12 months, up from 2.3% the previous month, and beating inflation again. For the last six months, London’s house prices have increased by an average of 0.5% every month from the month before. In the last three months alone, prices in the capital are up by 1.4%, showing the rate of price growth in the capital has started to pick up.

The Hometrack UK Cities House Price Index shows that annual house price growth across all UK cities stands at 5.3% – double the rate of inflation. The best rates of growth are in Birmingham (8%), Manchester (7.1%) and Nottingham (6.9%). Aberdeen in Scotland is the only city where house prices have fallen over the last year, proving that it is unwise to invest in a location dependent on a single industry (in Aberdeen’s case, oil).

The original headline for this report?

 “London house price slow down ‘bottoms out’”

See the negative spin on the very positive news?

Never rely on the news headlines to tell you the story. And never rely on a newspaper reporter to tell you the full story. Do what we do:

  • Read the article
  • Analyse the story
  • Take note of the facts
  • Break down into the important facts
  • Reject biased opinions
  • Search for evidence that corroborates or disputes
  • Make your mind up, and make properly informed investment decisions

To stay abreast of all the property investment news that matters, contact one of our team today on +44 (0)207 923 6100. Ask about our newsletter. We give it to you straight. No BS. No hype.

Live with passion

Brett Alegre-Wood

About the Author

Brett has over 20 years experience in all facets of property, he owns various companies centred around property and is the driving force behind the education and training at Gladfish. His companies have sold over £850 million in UK and London property and he manages over 1200 properties through his estate agency chain. Today he shares his time between UK, Australia and Singapore. He is married to Arlene and together they have 4 kids.

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