While household numbers are projected to rise from 27.5m in 2015 to 31.2m, a 13.5 per cent increase by 2030, the average household is shrinking, to 2.3 people from 2.96 in 1970. If this trend were to continue, households would fall to average 2.25 people by 2030.
The research carried out by insurer Legal & General with the Centre for Economics and Business and reported by the Financial Times (FT), predicts a glaring mismatch in housing supply.
Mark Carney, Governor of the Bank of England has, according to the FT, indicated his concerns about the housing market, pointing out that far too few homes are being built.
The Lyons Housing Review claimed that we need to build 243,000 new homes a year, which is far more than is being constructed at present. Most UK house builders believe that delivering more than 180,000 new homes a year is unachievable under current market conditions, according to property agent Knight Frank’s latest housebuilding report. The report also highlights concerns about the building industries skill levels and capacity following the recession years.
However, institutional investment is slated to surge following the Conservative victory in the election as government incentives lead to a £30bn investment in build-to-let, and a move is already underway to design new garden cities outside of London with the aim of providing jobs, new homes and economic growth in new locations outside the city as capital it runs out of room for new residential development.
It seems that although smaller households will boost demand for one and two bed units in the future, only around 50 per cent of new builds meet this specification, which could result in a mismatch between supply and demand.
Mark Holweger, a managing director at Legal & General, has said:
?The classic 'two-point-four-children' family unit has become '2.4 people' in today?s Britain. We are seeing smaller households inhabiting ever-smaller properties ' which in turn is creating higher numbers of overall households.?
The proportion of people renting has risen over the last 20 years, while those owning their own homes has been falling. The number of renting households has doubled over 20 years to reach 20 per cent of all households now. This proportion is expected to rise to at least 30 per cent by 2030.
Two major factors involving changes in the way people live are contributing to the shrinking size of households: Higher divorce rates where larger families are split into smaller groups and living separately, while increasing life expectancy means far more elderly people spend a lot longer living alone after the death of a partner.
It is thought that the increased number of smaller households will eventually be reflected in the UK’s housing stock, the trend to some extent favours more rentals as when families split they usually don?t have the financial resources to finance two owner occupied houses.
High property prices are encouraging owners of large properties to split them into smaller household units. The traditional Victorian five-bedroom house in many town and city locations has long been an ideal project for landlords to split into two, three or more separate households for renting. London in particular has seen this trend.
Another major trend identified by the reports is a migration from rural areas to city centres, which the report describes as 'settlements with 10,000 people or more?. In 1950 it says, 22 per cent or nearly one-quarter of the population lived in rural areas: by 2030 this is projected to have dropped to 14 per cent.
UK households will have to grow in number but shrink in size with only 2.3 people in each home compared to 3 in 1970, but will be have enough new builds to satisfy the demand?
Article courtesy of LandlordZONE