Previous analysis suggested that there would on average be 245,000 new households formed in each year between 2011 and 2021 but it is now anticipated to be 24,900 less per annum. The areas of the country which are projected to see the faster rate of household formation according to the updated figures continue to be found largely in London and the South East.
‘Although these numbers indicate that the demand for new housing supply is likely to be rather less than was previously anticipated, it is still way above the current level of development with new housing starts in England presently running at an annual rate of around 100,000,’ said Simon Rubinshohn, chief economist of the Royal Institution of Chartered Surveyors (RICS).
‘It is probable that house building will pick up over the balance of this year thanks in part to the more accommodating stance of lenders in providing finance in the wake of the Funding for Lending Scheme. Alongside this, the Help to Buy initiative should also encourage particularly some medium and smaller house builders back into the market,’ he explained.
He said that while it is a little too simplistic to assume that the yawning gap between household formation and new supply will ensure a rising trend in house prices over the rest of the decade, many think it will.
‘In the absence of a material downturn in the economy and/or a renewed tightening in credit conditions our suspicion is that this is indeed the most likely outcome,’ he said.
Rubinshohn also said that as a result the new mortgage guarantee scheme which is due to be implemented next year is likely to play a critical role in helping people access the market.
‘It could, however, also give a further boost to prices particularly in those parts of the country where the market is already running strongly,’ he added.