With the level of new homes being built in the UK still relatively very low, a housing shortage is set to return to the UK in a big way. With the population and demand for housing rising rapidly you can expect upward, long-term and continued pressure on UK property prices.

3 million people have come in to the UK over last 3 years according to CLG (Communities & Local Government Department) and the population is anticipated to increase from the current figure of 61 million to 70 million by 2029. Based on the last three years I would suggest that this estimate is on the conservative side.

So what is happening with the supply of housing?

During the peak of 2007 around 180,000 new homes were being built in the UK. This was some way short of the government’s targets of 240,000 per annum. Due to the credit crisis and subsequent credit restrictions for developers, current numbers have fallen to just 100,000 per year – and it is predicted to remain around this number (100,000 – 110,000) for several years.

So an upward spiralling population, building levels under half of the government’s desired quantity and inflation that is set to balloon again in a few years all point towards only one outcome – house prices being driven up sharply in years to come.

One of the few factors that can prevent this result is a removal of finance available to end buyers – but with recent signs of easing in the mortgage market all indications point to yet another prolonged period of strong growth in the medium to long term in the UK.

27^th November 2009