Analysing the rising price of new private housing in the UK: A national accounting approach

Abstract

Copyright © 2022 The Authors. Discussion of the price of private new-build housing is dominated by land price, but is this the most important element? Other factors are examined for increasing prices, using the rich and robust datasets produced by government departments and agencies. In organising these complex datasets a Sankey diagram is introduced to explain the relationship between type of trade and type of work to show the relative importance of prices. The land value component has been trending downwards, so is not a factor in the rising prices of new private dwellings. Prices of components, other than land value, are obtained from gross fixed capital formation data and construction output. When corrected for inflation, these have risen by factors of 1.7 and 2.0, respectively, over 1998–2018. By including the self-employed, the total labour per new-build private dwelling is derived which has risen 2.4 to 3.0 man-years over 2011–2020. Since 2000, construction companies’ gross operating surplus per job has risen much faster than compensation of employees per job. This extra gross operating surplus, which can be associated with profit, totalled £11.6b in 2019 reaching £70k (at 2016 prices) per new private dwelling in 2019. Rising prices have created the opportunity for housebuilders to extract larger profits.