The shortage of one- and two-bedroom homes has driven up prices, to everybody’s detriment

The last decade has seen the rise and rise of apartment living. Today, flats account for almost half of all new-build completions. What we have witnessed is an industry-wide response to government policy that sought higher density development on brownfield land.

The result has been the regeneration of city centres with swaths of new apartment blocks – large numbers of which have been bought by investment buyers. With the policy pendulum swinging back towards building more family homes, the question is, what types of housing do we really need to build to meet demand?

Many people may be surprised to learn that “family” housing – by which I mean homes with three or more bedrooms – account for 70% of the existing housing supply.

There is a danger that the need for affordable family homes is being translated into a requirement for more family homes overall.

The reality is that what we need are smaller homes to cater for those looking to get into the housing market as well as those looking to trade down.

One and two bedroom homes in the owner-occupied sector, for example, account for just 14.5% of supply.

This limited supply, combined with strong demand has resulted in the value of one and two-bedroom properties rising towards that of three-bedroom homes.

The net result of this is to lower turnover and the supply of family housing, which in turn leads to increased price pressures down the ladder.

As well as causing problems for those looking to get onto the property ladder the relatively high price of smaller homes has acted as a disincentive for those looking to trade down.

If we are to cater for demand and balance local housing markets then we need to deliver the right types, size and tenure of property. Too much of the housing supply debate is focused on headline numbers.

We need to move below the headlines and take a long hard look at the requirements of local markets – only then will we able to see how increases in supply can be targeted with the greatest beneficial effect for the market overall.

Richard Donnell, director of research, Hometrack