Flat building bias causes house prices to rocket

The percentage of new houses being developed in favour of flats has fallen by 25%, reveals the latest report from CB Richard Ellis and Hamptons International.

The continuing bias towards building flats has led to an imbalance in supply, pushing the price of an average family home up to more than £325,000. This represents a price increase of 101% in the last 7 years.

Houses now account for just 55% of total development, in comparison with more than 80% in 2000, and it is this growing tendency to develop flats that has resulted in a disproportionate increase in the cost of a family home. The situation is exacerbated by a lack of overall new housing supply right across the board, with research from Hamptons International indicating that there are now eight buyers for every property on the market.

Jennet Siebrits, Head of Residential Research at CB Richard Ellis, explains: “A significant increase in urban development and the rising number of single person households means that flats are becoming an increasingly common development option. However, the planning process and its restrictions are still by far the biggest constraint, with the drive to develop on brownfield sites and council density requirements causing a marked reduction in planning permissions for traditional houses and terraces.”

As a result, CB Richard Ellis and Hamptons International have noted an emerging trend whereby an increasing number of families are opting for extensions or loft conversions rather than moving. If the trend continues, Siebrits warns that it could result in market stickiness: “Those wishing to trade up will be affected if there are fewer middle tier transactions. Although Gordon Brown has set housing targets to deliver three million new homes by 2020, there is the risk that this could further encourage the development of flats at the expense of houses, with local authorities encouraging high density development as a way of reaching these targets.”