LSL New Build Index - regions improving as London slows
Despite housebuilding being 25% below its 2007 peak, there was still a 10% rise in the number of new houses started last year. But, says Shaun Peart, managing director of LSL Property Services, what impact has this had on new build prices?
“From our data it appears that in January 2015 year-on-year growth in new build prices stood at 7.2% and reflects ongoing growth in prices across the UK,” says Peart.
While growth was heavily impacted by the rapid increase in average prices in the Greater London area, Peart says we are now seeing regions across the UK contributing more positively and Greater London price increases slowing.
With the exception of the North West, all regions have seen an increase in the year-on-year house price growth, with the average new-build price change (excluding Greater London) at 4.6% in January 2015 compared to just 0.8% in the year to January 2014.
So, it would seem, while Greater London starts to reach the peak of its growth cycle, the other regions have only just taken off.
“It’s also interesting to consider the relationship between new-build prices and second hand prices and question whether incentives offered in the new-build market place are causing a distortion to prices. Are they pushing up new build prices when compared to second hand house prices?” asks Peart.
“At LSL we’ve looked at the pounds per square metre selling rates of new and second hand property and the premium that new-build achieves over second hand property, through time. It seems that new builds have continued to see an average premium of about 3% over second hand and, with this steady position held over more than 18 months, there are no indications that this – or indeed the steady increase in prices – will change any time soon.”
Keith Osborne, editor of Whathouse.com, says: “As Help to Buy approaches its second anniversary, it’s interesting to note its impact on new-build price changes over that period, steadily pushing up year-on-year price growth nationally. While it cannot be seen in isolation as the only factor in the recovery in the market, there’s no doubt that after its rather low key start, the government-backed initiative can certainly be said to have had a positive effect, judging by these LSL numbers.”
Osborne adds: “One might perhaps have expected the new-build premium to have moved upwards over the past few years, considering the shortfall of new housing supply compared with demand. With the rate of building unlikely to increase massively over the short- to medium-term, it seems equally unlikely that the premium will change much, as long as the nation’s need for homes remains.”