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Housing market 'moving away' from government targets

Friday, 25 April 2008 12:00 AM

The supply of new-build houses is threatening to weaken substantially in the present economic climate.

As a result the government's ambitions of building two million new homes by 2016 are unlikely to be met.

That is the view of property investment company Assetz, which argues yesterday's announcement from homebuilder Persimmon - which stated the company had postponed "the commencement of scheduled new sites until the mortgage market improves" - will not be the last.

"The announcement has come as no surprise and only supports what I have been saying since last September, developers are not starting work on new sites in the current climate," said, Assetz chief executive, Stuart Law.

"Persimmon is not the first and it will by no means be the last to announce a freeze on new starts, today's announcement is likely to be the first in a series of similar admissions across the housebuilding industry."

Persimmon took the decision after seeing revenues fall 24 per cent year on year, to 1.37 billion pounds.

"With the number of new-build properties set to decrease over the short term, we are effectively moving away, rather than towards government's overly ambitious targets of achieving three million new homes by 2020, this will ultimately support house prices and lead to renewed growth in due course," continued Mr Law.

The government hopes to add a further one million, carbon neutral, properties to its 2016 targets by 2020.

However, while Assetz argues the level of house building reductions is still to become clear, a 40 per cent reduction to 96,000 new housing starts for both 2008 and 2009 (from 2006 levels of 160,000 new homes) appears feasible.

Chris O'Toole

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