Lack of SME House Builders Linked to House Price Inflation

Lack of SME House Builders Linked to House Price Inflation

The Office for National Statistics (ONS) revealed that house prices across the United Kingdom grew by 7.7% between November 2014 and November 2015. At a regional level, house price inflation was 8.3% in England and 1.3% in Wales.

The National Federation of Builders (NFB) and the House Builders Association (HBA) have often drawn attention to the rise in house prices as a direct consequence of the chronic housing shortage currently affecting the country. However, increasing house price inflation could be linked to another key factor: the percentage of SME house builders operating in the housing industry.

In the mid-1990s, SME house builders made up two-thirds of the entire sector and the average house price, adjusted for inflation, gravitated around £60,000 according to ONS statistical data.

Twenty years on, the share of SME house builders has waned to merely one third of the entire market, with average UK house prices surging to £140,000.

The HBA believes that greater participation of SME house builders can help develop local communities without putting excessive strain on their local infrastructure. They would also bring forward new and more affordable homes to those people who are currently priced out of the market, through faster and more thought-through housing delivery.

Rico Wojtulewicz, policy advisor at the HBA, said: “Statistical analysis proves that there is a link between the decreasing participation of SME house builders in the sector and the rise in house prices. SME house builders have a unique ability to organically develop local communities and infrastructure.

The HBA calls on the government to do more in facilitating the participation of SME house builders, by helping them overcome the numerous financial and regulatory obstacles in their path.”

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