Challenges beset the market, but there's cause for optimism
The need for more UK housing – and particularly greater numbers of affordable, new build properties – has garnered more attention during the past few weeks of General Election campaigning, though not to the degree that the issue arguably deserves.
Amid the sometimes animated, sometimes bad tempered debates between politicians, Britain’s housing problem has been somewhat eclipsed by the recurrent headline-grabbing themes of immigration, health and taxes.
But a dearth of available housing does remain a real challenge, often due to the grindingly slow process for obtaining planning approvals which developers must endure before they can put spades in the ground.
New build developments are undoubtedly a key part of the solution. But according to data from the Office for National Statistics, there were 210,320 dwellings completed in the UK for the financial year ending March 2023, below the government’s target of 300,000 per year by the mid-2020s.
The sector faces other challenges, of course – some lenders require a 15% deposit for new build houses, and up to 25% for a flat, pricing some first-time buyers out of the market. Those apartments which are near or built over commercial premises, such as shops, offices or restaurants, are often viewed less favourably by lenders, prompting calls for a rethink on criteria.
And, if the problem persists, a lack of housing stock will almost certainly drive up the prices of those properties which are available.
How important is the new build housing market?
“The new build sector is essential in delivering the additional housing we need to meet the demand for homes in the UK,” said Andrew Peters (pictured left), head of technical services at Countrywide Surveying Services.
“There is no apparent clear housing strategy in either the private or public sector to meet current and future housing requirements. We need a clear strategy to delivering housing across both the private and public sector. This needs to be agreed and committed to by all political parties so everyone has certainty and can deliver more housing in a sustainable way, meeting net zero goals and at affordable prices.”
Peters highlighted the net zero-centred innovations coming into the market, which he has seen for himself at developers’ sites, where they are trialling new technologies. He has also witnessed at factories how developers are looking to shift some of their construction from traditional on-site brick and block to modern methods of construction.
“These visits have provided a fascinating insight into what we are likely to see next in the new build sector,” he commented, “and allow us to start considering how these alternative construction methods and new technologies might be received by consumers and if, or how, they could affect value.”
What incentives are available to buyers of new build properties?
Various purchase schemes and incentives, particularly around affordable housing and first-time buyers, are available. But the differences between them and the longer-term implications are not always clear to buyers - and can be confusing.
“Increasing awareness not only of the availability of these schemes but also the pros and cons of each could only be a good thing,” Peters said.
Falling inflation and predictions of falling interest rates, coupled with higher wage growth has offered some relief, with the prospect of returning confidence to the housing market and, therefore, the new build sector.
“With material and labour shortages, increased costs, along with higher interest rates resulting in a subdued housing market during Q4 of 2022 and throughout 2023, many builders have reduced output levels,” shared Peters, “with some reporting the lowest output levels of new homes since the Second World War.”
Output of new build housing is not anticipated to improve significantly until 2025, he added. That said, earlier this month leading developer Bellway PLC announced that it was on track to deliver around 7,500 homes in this financial year. Its reservation rate for properties average 152 per week from the beginning of February to the beginning of June, compared with 139 in the same period a year earlier.
Orla Costello (pictured right) , senior director of property development at specialist United Trust Bank, believes that once the industry sees the first cut in base rate there will be a major boost in overall market confidence.
“We’re seeing strong levels of new enquiries for a wide variety of schemes from high end apartments to outstanding energy efficient family homes,” she said. “We understand speed and flexibility are two of the most important things an SME developer needs, so we guarantee timely monthly drawdown payments and are willing to assist with issues such as advanced payments.”
Across estate agent Jackson-Stops’ network, there are encouraging signs that the property market picked up in the spring. Its chairman, Nick Leeming, confirmed: “We have seen a positive year-on-year uptick in viewings, new instructions coming onto the market and new buyer enquiries, positioning the market well for a more active second half of the year.”
