Housing minister Matthew Pennycook has stated that the Labour government’s plan to build 1.5 million new homes by 2029 will affect property prices, telling MPs that the “best scenario” would be a “levelling-off” in house price growth.
Supply and demand dynamics
Speaking in the House of Commons, Pennycook outlined the relationship between housing supply and pricing. “If you flood a local housing market with homes of any tenure, you will have a positive impact on housing affordability,” he said.
According to the Daily Telegraph, the minister cited research indicating that a 1% increase in housing supply would result in a 2% decrease in property prices. However, he emphasised that any price adjustments would occur gradually rather than sharply.
“It will take some time – even if we had high and sustained rates of housebuilding of the kind that we hope the reforms we’re making will secure – to see house prices drop,” Pennycook stated. “I think the best scenario that we can expect is a sustained levelling-off of house price growth, and then a gradual easing of it over time.”
Delivery concerns
The government’s ambitious target faces scepticism from those responsible for its implementation. Data from public sector procurement firm Pagabo indicates that less than 1% of civil servants working on housing delivery believe the 1.5 million homes target is achievable.
Current market conditions
The minister’s comments come as the latest Halifax House Price Index shows average UK property prices exceeded £300,000 for the first time. The index recorded a 0.7% rise in January, bringing the average property price to £300,077, following a 0.5% decline in December.
The government’s housing plans represent a significant intervention in the property market, with potential implications for homeowners, investors, and first-time buyers. The actual impact will depend on whether the construction targets can be met and how quickly new supply enters the market.
