A recent report reveals that planning approvals for home construction in England have dropped to their lowest level in over ten years, with approximately 230,000 units permitted in the year up to June. Glenigan's data shows that the second quarter of 2024 recorded similarly low approvals. In response, Prime Minister Keir Starmer has established a new target of 370,000 new homes annually, alongside planning reforms. While some signs of recovery in the housing market have emerged due to reduced borrowing costs, the lack of supply has caused rents to rise by 8.4% and house prices by 2.2%. The Bank of England is holding interest rates steady while monitoring inflation.
According to an industry report released last week, planning approvals for home construction in England have dropped to their lowest level in over a decade. The Home Builders Federation, the primary trade organization for the sector, reported that approximately 230,000 housing units were granted planning permission in the 12 months leading up to June, the lowest figure for any 12-month period since 2014. This trend highlights the challenges the new government faces in increasing house-building efforts.
Data compiled by the analysis firm Glenigan revealed that the second quarter of 2024 saw the lowest number of building approvals in a decade. Following a decisive election win in July, Prime Minister Keir Starmer has introduced mandatory housing targets for councils in England, along with planning reforms, to accelerate economic growth.
The government aims to provide 370,000 new homes annually across the United Kingdom, increasing the previous target of 300,000 that was scrapped by the former Conservative administration. Neil Jefferson, Chief Executive of the Home Builders Federation, commented that the significant decline in planning permissions clearly highlights the difficulties the new government faces in enhancing housing supply. According to the HBF, permissions for both building sites and homes in England have been declining since 2022, with new housing schemes reaching their lowest level since data collection began in 2006.
Although some indicators of Britain's housing market have shown signs of recovery following a reduction in borrowing costs, the insufficient housing supply has driven up both prices and rents. Official data revealed that rents increased by 8.4% in the year leading up to August, while house prices rose by 2.2% during the same period. Last month, the Bank of England lowered interest rates to 5% but decided to maintain borrowing costs on hold last week as it waits for evidence that inflation risks have been addressed.
The current state of England's housing market underscores significant challenges ahead. With planning approvals at a historic low, the government's ambitious target of 370,000 new homes annually will require strong action and reform. While recent efforts by Prime Minister Keir Starmer aim to refresh the sector, ongoing supply shortages are exacerbating affordability issues, as evidenced by rising rents and house prices. The Bank of England's cautious approach to interest rates reflects the delicate balance needed to foster economic growth while managing inflation risks. The coming months will be crucial in determining whether these initiatives can successfully stimulate housing development.
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