Last year, 156,000 new homes were started in Great Britain. This is the highest number of new starts since the downturn in 2008 but still just over half of what we should be building.

Following the introduction of the NPPF, and with the improving economic circumstances, consents for residential development have been rising over the past three years. In 2014, full permission for 196,000 units was granted in England, a 20,000 increase on the previous year.

However, although the number of consents has been rising, they are not being delivered in high enough quantities in areas where there is greatest housing need and where it is viable to build. In parts of the country where there is high housing demand such as Brighton, Oxford and East Cambridgeshire, the number of consents delivered per annum amounts to less than 20% of need.

Other local authorities in areas of lower demand such as Fylde and Middlesbrough appear to have sufficient consents, but given these are in lower value areas, it is more likely some of these schemes will not be delivered. Our analysis of stalled sites from Glenigan planning database shows 58% of the 100,000 stalled consented units in England and Scotland are in areas with residential values below £200 per square foot.

This partly explains why new home starts have not increased at the same rates as planning consents. We have also seen an increasing number of large sites coming through the planning system which take longer to build out. Growth may have also slowed due to the constrained mortgage market and fears of Help to Buy being withdrawn after the election, which created uncertainties over future demand.

In order to increase housebuilding and progress towards meeting housing need, there must be a steady supply of land in high demand areas. Positive steps have been made towards this in London with the establishment of the London Land Commission, which seeks to identify surplus brownfield public sector sites. It is estimated the commission could support the delivery of 400,000 homes on brownfield and public sector land by 2025.

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Source: Savills Research, Glenigan

Can housebuilders increase capacity?

Private housebuilders have been increasing starts over the last six years, reaching 115,400 starts in England in the year to Q1 2015. This amounts to 82% of total starts, and we expect to see the private sector continue to deliver the majority of new homes.

We estimate the output of private housebuilders could rise to 150,000 per annum in England by 2020. Several have plans for significant volume expansion; Bovis plan to double their output to 5,000–6,000 homes per annum by 2018, and Galliford Try are aiming to increase completions by 50% on 2013 levels.

The medium sized housebuilders (those building 100 to 2,000 homes per year) have the greatest capacity to expand their output as they are starting to benefit from better finance conditions and opportunities that are not in direct competition with the larger housebuilders. We expect this group to be producing around 31% more homes per year by 2020.

However, there are constraints in the market that could hinder this expansion. As previously outlined, the supply of land is a crucial issue: as are planning delays as local authorities have reduced capacity to deal with applications due to public spending cuts.

The availability of labour has also become a considerable constraint, with 49% of builders citing it as a major constraint in the most recent HBF survey. Bricklayers and joiners are in particular demand and the shortage of labour has delayed the completion of some sites. Yet, the issue of cost and availability of materials is easing, and some two billion bricks are expected to be produced in the UK this year.

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Source: HBF, DCLG, TCPA

Alternative developers

The capacity to build more homes would grow significantly if we support a wider mix of developers and organisations commissioning housing. Our analysis shows that housing associations and local authorities have the potential to start building 45,000 new homes a year in England by 2020, with housing associations delivering 35,000 of these.

Housing delivery could be boosted further if more support is given to companies building for the rental market. We estimate that institutionally-funded PRS could add 10,000 new homes to the mix under the right conditions.

This would bring the potential number of homes that could be started by alternative developers to 55,000 a year by 2020, an increase of 120% on the 25,000 new homes started by housing associations and local authorities in the year to March 2015.

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Source: Savills Research

Land Values

Demand intense in South East

Development land values in the UK have remained stable with only a slight increase of 0.5% over the last three months. However, the picture across the country is varied and becoming increasing polarised.

■ Urban land values in Scotland bounced back following the referendum, increasing by 6.9% in the last quarter. This replicates the rise in greenfield land values in the previous quarter.

■ Demand for land is more intense in the South East; land values are highest and have surpassed their 2007/08 peak in some places including Oxford and Sevenoaks.

■ In the medium term residential development land values in high demand areas are likely to rise unless significantly more supply is brought to the market. This could pose a barrier to small and medium builders seeking to return to the market.