One of the main reasons for the recent rises in UK house prices is the continued shortgage of supply. When supply is limited it means that only a small increase in demand is required to cause prices to increase. This inelastic supply (supply doesn’t change) also means that house prices are more volatile. i.e a small fall in demand for housing would also cause a big fall in price.
To combat the shortage of affordable housing the UK government has announced plans to increase the number of affordable housing available. Especially in the South East where the shortage is most acute.
However finding suitable locations for building houses is often a tricky local issue. Frequently building new houses clash with building on green belt land. Also local people often object to the possibility of increasing traffic and congestion associated with new houses.
Redrow, one of Britain’s biggest housebuilders, said that the Government is not helping in its own plan to build more houses.
Mr Fitzsimmons said: “Disappointingly, the new planning guidelines appear to exclude low-cost open market housing from the definition of affordable housing. As a consequence, our ability to achieve our medium-term volume ambitions for Debut will depend on the response of local authorities to this new guidance.”