Construction was started on 44,740 new homes between July and September - up 12% year-on-year, according to the Government.

Despite a 12% jump in the number of new homes being built in England, demand looks set to continue to outstrip supply.

Construction was started on 44,740 new homes in the three months to the end of September, 12% more than in both the previous quarter and the same period a year earlier, according to the Ministry of Housing, Communities & Local Government.

But the number of properties that were completed was flat quarter-on-quarter, while the figure was only 3% higher than it had been the previous year.

At the same time, only 163,420 homes were built in the 12 months to the end of September, well down on the estimated 250,000 new properties needed each year to keep pace with demand.

The total was also nearly half the Government’s target to have 300,000 new homes built annually.

The disappointing figures suggest the current mismatch between supply and demand will continue, putting upward pressure on house prices over the long term.

Why is this happening?

The Government has set an ambitious target of building 1 million new homes by the 2020.

It has launched a number of initiatives to help reach this goal, including streamlining the planning process, introducing new sources of funding for housebuilders and providing infrastructure support for new developments, as well as encouraging buyers to purchase a new-build home through the Help to Buy equity loan scheme.

But the number of properties being built has remained stubbornly low due to a shortage of labour and building materials, a lack of suitable land and delays in receiving planning permission.

New-build home completions are also still 15% below the peak they reached in 2007 before the financial crisis struck.

Above: Three-bedroom semi-detached new-build house for sale in Basingstoke, Hampshire

Who does it affect?

Any rise in the number of homes being built is good news for potential buyers as it helps to expand the number of properties available.

But the fact that additions to the housing stock are failing to keep pace with population growth is bad news for those looking to get on to the property ladder or trade up it, as it suggests prices will continue to be pushed higher and affordability will become increasingly stretched.

It is also important to remember that the new homes being built may not be of the type or in the location needed to meet demand.

What’s the background?

While the ongoing shortage of homes in relation to population growth suggests prices will continue to rise in the long term, it does not necessarily mean they will also increase over the short term.

While the balance between supply and demand is the main factor that drives property values, other issues also impact price growth, including affordability, consumer confidence, interest rates and employment levels.

A combination of rising interest rates and political and economic uncertainty, as well as stretched affordability in areas that have seen strong house price growth in recent years, have put the brakes on the housing market in recent months.

Growth in property values is expected to continue to be subdued this year, although high levels of employment and the ongoing shortage of stock is expected to prevent a house price correction.

Top 3 takeaways

  • Construction was started on 44,740 new homes in the three months to the end of September, 12% more than in both the previous quarter and the same period a year earlier
  • But the number of new-build homes that were completed was flat quarter-on-quarter and rose by only 3% compared with the previous year
  • The number of new homes being built remains well down on the level needed to meet population growth

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