As a soon to be ex-member of the EU, how does Britain do at building new homes when compared to continental Europe? Is Europe a paragon of efficiency when it comes to building new homes? The Netherlands, Germany and Scandinavian countries are often held up as some sort of housing market utopia when compared with Europe.
So whilst Britain is still in the European Union I thought I would take advantage of the relatively comprehensive comparable statistic that the EU accumulates on various things that seem to be of interest to it, not least housing. Allied to this, I have found an interesting set of statistics compiled by the European mortgage industry that includes housing completion data from across most of the EU (except, for some reason, Italy, which is a bit of a shame)*. So combining the two gives a snapshot of the UK’s housing market’s comparative performance against our European soon-to-be-ex friends and neighbours.
Curiously, the UK sits only slightly below mid-table (15th of 23) when completion rates (I’ve measured them as average homes built per year, per 1,000 population). The median is around 3 homes, with the UK delivering around 2.7. My suspicion is that this may also be skewed by higher completion rates in Scotland and Northern Ireland, and conversely lower rates in England and Wales, although no doubt other countries also have acute regional imbalances that national averages mask as well. So on the face of it, perhaps the UK’s housing crisis is not unique to the UK alone.
I wondered if there was a relationship between housing and population density. Would less densely occupied countries find building more homes easier than more crowded places (such as the UK)? If people are more spread out, would NIMBY-ish tendencies be reduced? In fact, there seems to be absolutely no relationship between the two – population density is completely useless as a predictor of housing completion rates. Market conditions, demographics and perhaps regulatory constraints perhaps have a far greater role than a crude measure of how densely occupied – or not – a country is.
What is far more closely correlated is population growth and housing completions. Instinctively, this makes sense. One would not expect a country with a shrinking population (such as Lithuania where the population has fallen by almost 14% since 2005) to make as much effort to grow its housing stock as one experiencing a population boom. The data show a clear link between the two and fairly strong trendline. In fact countries with higher population growth rates seem to have housing delivery that clusters above the overall trend.
And this is where the UK’s underperformance really seems to stand out. Based on European trends one would expect it to be building almost twice as many homes a year as it currently does. France and Spain – with similar levels of population growth – have managed to build almost twice the level of new homes (although obviously Spain has experienced its own acute housing market problems).
The UK builds the level of homes one would expect from a country with a shrinking – rather than rapidly growing – population.
The UK produces a similar number of homes per head, per year, as Germany but Germany’s population has shrunk slightly over the study period. Ours has grown by around 4.5m.
The ‘right’ number of homes that the UK should be building is always open to debate; knowing the number at which the market would clear and house price inflation would be tamed is probably not possible given the complexity of the market. Demographics-based targets are always open to dispute (especially when each local authority area in England, at least, sets its own Objectively Assessed Need). But a comparison with Europe does suggest that – very roughly – close to doubling housing delivery, as sought by the Government, would be needed to bring us back on trend with Europe.
But then, being on trend with Europe is not really a strong guiding principle at present.
* I’ve also excluded Greece and Cyprus as they seemed to be outliers in whatever way I looked at the data, I am guessing because of Greece’s particularly acute economic problems.