Supply Chain Issues have been wreaking havoc across the globe but what are the impacts going to be on the UK housing market?
Housebuilders have been grappling with the scarcity of new building materials and increased costs, all of which have impacted the delivery and cost of new homes. These supply-chain backlogs are consequently causing massive delays in new home construction across the country and sending prices soaring to record levels.
The pandemic effect has only been exacerbated by a trio of other events: the ongoing logistics backlog caused by the blockage of the Suez Canal in March; customs delays and a labour shortage as a result of Brexit. All of this contributes to “a perfect storm”, but just how bad is that storm and how is it affecting the market for new build homes?
The data certainly backs up the evidence that the supply of new homes is being adversely affected. According to the Office for National Statistics’ latest construction material price indices, the cost of materials for new housing increased by 19.8% in the year to the end of July 2021, while repairs and maintenance costs were up 23%. The main shortages are around timber, but there’s also shortages of cement, aggregate and steel to name a few.
As expected, the increase in price of building materials has directly translated to increased new build house prices. Before supply chains began to come under serious stress, contractors were quoting £2,100 per square meter, about six months ago. Compared to now, where we see contractors quoting 2,900 per square meter. These price rises are only predicted to accelerate in the coming months. This is good news for landlords that have recently purchased new build properties as price increases for comparable flats will inevitably lead to their own asset appreciating in value, whilst also providing an incentive and adding urgency for those considering buying.