At the end of January, Savills reported that during the 2010s, population growth in England was more than double the number of homes built. The report found that in the North East, where population growth has been slower, there were just 1.3 new people for every new home built. In London, where housing delivery has long trailed short of need, the population rose by 3.4 for every new home.
The firm added: ‘This mismatch of housing supply and need has had drastic consequences for affordability. Rents increased 2.0% per year in England on average over the last decade, according to data from Hometrack. Growth ranged from 2.4% per year in London, where housing delivery was lowest relative to population growth. In the North East, by contrast, housebuilding all but kept pace with population growth and rents grew just 0.7% per year.
‘This analysis shows that homes would be more affordable for renters and homeowners alike if we could simply build more of them. If we are to reduce housing costs in the South of England and London where they are least affordable, we need to increase the supply of homes there. Government is certainly right to encourage more housebuilding in regional cities to help support the ‘levelling up’ agenda. But doing so, without also accelerating delivery in the South and East of England, risks those areas becoming less affordable still.’
The points made by Savills are valid but I am a firm believer that more data provides better insight so before we look at what might happen in the 2020s, I want to look back at the past 40 years to see just how clear-cut the link is between new home delivery, population growth and property prices.
Not a clear cut link between supply, population and prices
Breaking the past 40 years into decades (80s, 90s, 00s, and 10s), and using NHBC data on UK home completions (private, housing associations and local authorities combined), ONS data on the UK population each year, and finally Nationwide data on UK property prices, revealed something interesting. There is not a clear link between the three.