Global real estate firm, Savills has forecast strong house price growth of 18% in Wales over the next five years, which would make it one of the fastest-growing markets in the UK.
While housing supply is almost meeting need, there is still a shortfall in the provision of affordable homes in Wales. The predicted house price rises are expected to put further pressure on the sector.
Caroline Jones is an associate director in Savills development team in Cardiff, specialising in residential development.
“The value of residential property in Wales is fast catching up with the rest of the UK. The removal of the Severn Bridge tolls this time last year has already had an impact on prices in the south east of the country and this is likely to ripple out further in coming years. While this is good news for home owners, it will push the limits of affordability for more households, making the requirement for affordable provision increasingly urgent.”
2,592 new affordable homes were delivered in 2018/19, up from 2,316 in 2017/18, while the Welsh Government expects to have completed 3,569 during 2019/20. Despite the improvement in delivery rates, it currently still falls 33% short of the requirement of 3,895 more affordable homes per year over the five years to March 2024, as set out by the Government earlier this year.
The average annual requirement of 3,895 affordable homes over the next five years, set out by Government earlier this year, equates to 47% of new homes built between 2019 and 2024. However, Savills figures show that only 34% of new homes completed since 2010 were affordable.
Commenting on the research, Caroline said:
“Welsh Government is aiming to build 20,000 new affordable homes over the next five years, an ambitious target in the current climate. Not only does it mean upping annual delivery to 4,000, there is already an accrued shortfall to address.
“Whilst the target to develop is welcomed, as it should contribute to addressing the affordability issue, it undoubtedly puts pressure on providers to deliver. This new drive is also an opportunity for those in the sector to innovate and ultimately to provide the quality, as well as the volume of affordable stock we need.”
“We are seeing action within the public sector, with councils gearing up to develop stock and strategic initiatives by Housing Association involving private sale to cross-subsidise the affordable housing provision.
“The challenges are significant. Availability of land is an issue, which is resulting in private and public sector housebuilders competing for the same sites. A shortage of skills and labour is another key barrier to overcome in order to upscale to this level.”
Help to Buy has been a major factor in the new build market, accounting for 20% of all new home sales since 2015 and this reached 25% of housing supply in 2018. During 2019, the number of Help to Buy sales fell back slightly to 20% of all new homes to September 2019, however it remains a key contributor to new homes delivery.
Welsh Government has yet to make a decision on whether to follow England in extending Help to Buy beyond 2021. This creates uncertainty for housebuilders, who will currently be buying land to develop after this date. Focus will also turn to affordable housing providers, who will try and address this issue by creating alternative low cost home ownership style products.