House-building slumps to record low

Nicky Burridge,Pa
Thursday 20 November 2008 11:56 GMT

The number of new homes being built in England has slumped by a third during the past quarter to reach a record low, Government figures showed today.

Around 22,200 new properties were started during the three months to the end of September, the lowest level recorded by the Department of Communities and Local Government since it began collecting data in 1980.

The figure was 33 per cent fewer than during the previous quarter and 48 per cent down on the same period of 2007.

The drop in the number of properties being built by private developers was even more severe, with new housing starts diving by 55 per cent year on year.

However, there was a 20 per cent increase in the number of homes being built by registered social landlords, compared with the same period of 2007.

A total of 4,790 properties were started by registered social landlords during the three months, although this was 18 per cent down on the previous quarter's 11-year high.

DCLG said the number of new homes being built overall was now less than half the level recorded during the first quarter of 2006 when building levels peaked.

At the same time, the rate at which new starts are declining doubled during the third quarter to a 48 per cent year-on-year drop, compared with a 20 per cent fall in the second quarter.

House-builders have been hit hard by the problems caused by the credit crunch, with the mortgage shortage leaving potential buyers struggling to raise the finance they need to buy a home.

The problems have been particularly acute for first-time buyers, with lenders demanding increasingly high deposits, forcing many people to put plans to get on to the property ladder on hold.

Falling house prices have also led to many house-builders delaying starting new projects, with the sector shedding thousands of jobs.

House-builders' share prices have plummeted amid concerns that the firms could breach their banking covenants, while they have also been forced to write down the value of their land banks.

The DCLG figures showed that the number of new homes completed slumped for the third quarter in a row during the three months to the end of September, dropping by 10 per cent compared with the previous one to 33,300, the lowest level for six years.

On an annual basis, 126,700 properties were started in the 12 months to the end of September, 31 per cent fewer than during the 2005/2006 peak, while 154,300 properties were completed, 9 per cent fewer than a year earlier.

The number of homes being started was lower in all regions of England apart from London during the third quarter, with large falls recorded in the South East, North West, West Midlands and Yorkshire and the Humber.

The downturn in the house-building industry makes it increasingly unlikely that the Government's target of having three million new homes built by 2020 will be met.

Housing Minister Margaret Beckett said: "We have been clear about the scale of the challenge of our house-building targets in the current economic conditions, but now is not the time to row back on our long-term ambitions.

"At the same time we are taking action to help industry weather the downturn with a range of measures including buying unsold stock and bringing forward our investment for affordable housing, and we are continuing to look at what more we can do.

"We need to be ready for when the recovery comes to press on with our programme to meet long-term demand for housing from first-time buyers, families on waiting lists and those living in overcrowded homes."

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