The dramatic shift in homebuilders constructing flats rather than houses has contributed to a continued downturn in the new homes market according to a report from SmartNewHomes.com.

Average new home prices across the UK are down 4.8% on the same time last year according to monthly data from the property website, which covers over 85% of new homes in the UK.

Whilst houses rather than apartments are more popular with homebuyers, government restraints on homebuilders mean that the industry is forced to build smaller units. As a result, the new homes market is seeing prices decreasing more than the wider market as a surplus of cheaper apartments drags down average prices.

Year of decline

SmartNewHomes.com’s monthly new homes report shows the average price of a new home in November was £255,751, down 4.8% on the same time last year. The report shows that, aside from a slight recovery over the summer months, the UK housing market has been in decline for over a year. Although month-on-month prices recorded a marginal increase of +0.2%, quarterly figures, more indicative of longer-term trends in the market, show a continuing slowdown with prices down by 2.4%.

Apartments dominating

Of the new homes currently available in the UK, over half (54.7%) are apartments compared to less than a third (30%) of detached homes. This has been a sharp shift from three years ago when apartments formed just 33% of new home stock with detached homes dominating at 48%.

At the same time, apartments have seen the sharpest drop in prices in the last two years, with average prices falling by 15% since 2003 compared to a decrease in the average market price of just 5%.

David Bexon, Managing Director of SmartNewHomes.com, commented: "These figures make it clear that there is currently a surplus of apartments on the market and this is having a negative effect on average prices."

"The shape of the new homes market has changed drastically over the last few years as a result of the government’s limitations on homebuilders’ activity. With limited greenfield sites made available for development and tight constraints on housing density, homebuilders have been forced to adjust their mix of property types but demand has not shifted in the same way. Homebuyers still prefer detached and semi-detached properties for family and starter homes but there is distinct shortage of these on the market."

Bexon acknowledges the pre-budget report announced further planning changes but said, "… immediate action is required to allow and incentivise homebuilders to build the properties that homebuyers are demanding in the areas they want them in."

"Oversupply is a real issue and the is down to the government. The chancellor has made his pledges in the pre-budget report this week and it is now time to deliver," he said.