Liam Halligan: Why does the UK have a chronic housing shortage?

The average UK house price is now over £248,000, with prices surging over the summer, rising at their fastest pace for five years.

An average home now costs almost eight times average earnings – compared to the historic long-term price-earnings multiple of four times. Buying a house is now twice as difficult than it was during most of the 1980s, 1990s and 2000s.

Is it any wonder those aged 25 to 45 years old now spend more on housing and are more likely to rent than ANY generation since the 1930s?

House prices last month were 11% higher in August than in August 2020, according to new figures from Nationwide. And this month prices were 10% higher than last September, as the price surge continued.

During the pandemic, the housing market has been turbocharged by the stamp duty holiday, cheap mortgage deals and the demand for more space. We've seen double-digit house price growth for five months in a row – with Wales and Northern Ireland seeing the strongest rises, a price growth in Northern England continuing to outpace the South East, including London.

The basic problem – as “On The Money” often highlights - is the UK's chronic housing shortage. We need 250,000 new homes each year to meet population growth and new household formation, yet housebuilding hasn’t reached that level since the late 1970s.

Figures out today shows a sharp decrease in what the building industry calls “completions” – new-build homes brought to market. There were just 43,660 completions between April and June, equivalent to around 175,000 annually, far fewer new homes than we need.

And that April to June completions number was 10 per cent down on the previous quarter, even though completions usually rise during the summer months.

The demand for homes is booming, yet there's a chonic shortage – so both house prices and rents are spiralling.

Plus, over the last decade, that homes shortfall has seen overcrowding and homelessness escalate among low-income families too.

So that’s your “On The Money” question today – a question of pressing importance to so many younger and lower-income viewers, one of the perennial questions of UK politics and policy-making.

Why does Britain suffer from a chronic housing shortage?