Buying, and selling, property in 2021 has been at an all time high, mainly due to a break in stamp duty charges. And for the past six to eight months, Tradespeople around the UK have seen a boom in home renovation.
However, with supply chain issues set to head into 2022, and skilled workers hard to find, are prices becoming too steep for consumers?
Rising cost of buying a home
New builds have been dominating UK skylines for decades, with London continuing to be the most popular location. Each year, 247,000 houses are built in England and Wales.
This is short of the government’s target of 300,000 a year, but there are several reasons for this.
More people are choosing to live alone, which is putting extra pressure on targets. And the rise in living and construction costs has locked most consumers out of the market.
The average price of a property was £250,000 in 2021, £52,000 more than in 2019. Not a bad profit for those who managed to get on the housing ladder a few years back. Analysts will tell you house prices are rising at incredible rates. But hasn’t it always been this way?
To find out, let’s go back to the 1950’s.
If you bought a house in 1950 for £1,891, that same house would be worth £250,772 today. What’s interesting, however, is the increase in property prices since 2010.
Since 2010 property value has grown incredibly fast.
This twenty year increase is higher than the increase between 1950 and 1990 (40 years).
There are hundreds of reasons for such a huge jump in value. And we could spend all day breaking down how inflation rates, tax increases, population trends, and areas in high demand, have pushed up prices.
For tradespeople however, the reason behind this increase is easier to understand.
The past 12 months
Since November 2020 house prices have shot up 10%. Low interest rates, foreign investment, and a pause in stamp duty has led to an explosion in the market.
It is predicted that house prices will continue to rise between 5-10%, in 2022.
A major factor pushing prices up is the lack of materials and supplies to build property or make renovations. There is also a shortage of tradespeople across the UK, which is great for wages, but a disaster for project deadlines.
David Hannah of Cornserstone Tax, has suggested that supply issues will improve in the coming months, however easing labour shortages is more of a challenge.
He goes on to explain that the construction industry is currently short of thousands of project managers and tens of thousands of tradesman.
Many migrant workers have left the UK in the past twenty months, and Brexit has made freedom of movement challenging for those looking for work
Even for firms, and sole traders, that do find talent, it often takes weeks to train and get them up to standard.
Price of labour and materials
With manufacturing lagging, supply chains are still an issue for much of the world. And when there is less to go around, prices increase. The Office of National Statistics reports a 7-8% rise in materials prices in the year ahead, with timber and copper top of the wanted list.
And, as mentioned, labour shortages are impacting the industry, which has led to a further 25% price increase in project costs.
RESI estimates that consumers will be paying an extra 10-15% on home renovation over the next twelve months.
But are consumers getting a fair deal?
Homes are shrinking
More demand for houses means less space to build them. Less space leads to higher prices. But a higher price means more value for your money, doesn’t it?
The fact is, new homes in the UK are shrinking. And they have been shrinking for 70 years.
Let’s take a look.
We’ve already seen how much prices have changed in the past 50 years. And you’ll notice from the numbers above that consumers are now paying more for less.
There was a period in the 1970’s where the average size of a new home increased. But since then, the homes we’ve been building have been shrinking.
Only time will tell if this trend is set to continue.
An opportunity for tradespeople
Renovation is set to be big business in 2022, and this means more work for the industry.
Spare rooms are being converted into offices as work from home becomes more permanent. Extra breathing room is being created through extensions. And outdoor space is more appreciated.
For more info on what is set to trend over the next twelve months, click here to read RW4Y’s guest blog.
So what are your thoughts?
As a builder are you finding it difficult to hire sub-contractors to help with work?
Have you managed to find the materials and supplies you need to complete jobs?
How do your customers feel about rising prices? And has this reduced the amount of work you’re being hired to do?
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