Government strategy could be restricting the supply of new homes


Wednesday 5th September 2012

PM David Cameron and deputy PM Nick Clegg with housebuilders earlier this year.

Fresh analysis by Savills property consultancy raises questions around the government's strategy to support the sluggish housebuilding sector.

With the major residential property event, RESI, just a few weeks away (13th to 14th September), analysis compiled by Savills at RESI 2011 has just been re-evaluated by the property firm ahead of this year's show.

It revealed that while the industry has a very good understanding and made accurate predictions about current trends and immediate changes in the property sector, there has been an imperfect understanding, and inaccurate predictions made, of the direction of travel in the broader economy and longer-term issues affecting the economy and residential property.

Savills' Yolande Barnes points to the fact that the recent unexpected increase in developer profits caught the property industry completely by surprise. Most respondents had expected them to fall. It turns out they have increased by around 25% in 2012 against the previous year.

"This is disturbing because it suggests an imperfect understanding of how housebuilder business models and behaviour are interacting with the wider economy, with the unexpected funding environment and even with changing policy conditions," said Barnes.

A better understanding is required if the residential property industry is going to adapt and help increase the supply of new homes across the country in the future, as well as in the short term.

"Government also needs to understand the likely changes and impacts accurately if it is to make effective policy in this area and increase the output of homes in the future," added Barnes.

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