Mark HollowayIwona Hovenko, Senior Real Estate Analyst at Bloomberg Intelligence, comments on a new report finding that UK homebuilders Barratt, Taylor Wimpey, Bellway and Berkeley may see an easing of planning delays and growth in outlets and completions if the Labour Party wins the impending General Election.
A potential Labour Party win on July 4th could unlock the clogged construction market, with the major housebuilders complaining about worst planning delays they’ve ever experienced. This, combined with proposals to accelerate homebuilding on low quality land surrounding cities and brownfield sites, as well as plans for new towns, could help lift residential construction after years of inertia. Yet suggested steep affordable-housing targets (40-50%) could make the maths difficult for homebuilders and hinder project delivery.
Targeted incentives for first-time buyers could open doors to home ownership to tenants stuck in rentals. However, possible localised rent caps in some areas could deter landlords and further constrain supply of rental homes in some of the hottest markets, such as London.
Further, quicker approvals could come with onerous affordable housing targets, increased regulation and taxation, making the situation less straightforward for developers.
In 2023, completions fell 11% to 158,000, while starts plunged by 16% to 149,000, the second lowest it’s been since 2016.
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Shortage Calls for UK Homebuilding Volume to Double
The National Housing Federation (NHF) and the charity, Crisis, estimate England needs 340,000 new homes each year to meet demand, up from a prior goal of 245,000. Yet only 154,000 houses a year were on average started and 156,000 completed in England in 1978-2023. This is only about 45% of the NHF new-home target and about half the government’s now-decreased 300,000-home goal, fuelling house-price growth.
In 2023, completions fell 11% to 158,000, while starts plunged by 16% to 149,000, the second lowest it’s been since 2016. Homebuilding volume may remain low in the near term amid planning delays, high building costs and weak sales. This may worsen the UK housing shortage, which Centre for Cities estimated was at 4.3 million homes in early 2023.
We can also see this positive demand trend in the improving private weekly reservations per site of homebuilders Taylor Wimpey and Persimmon, who reported Q1 trading updates in late April.
Mortgage Approvals Suggest Steady Housing Rebound
Rising mortgage approvals for house purchases suggest a continued improvement in buyer demand, even with April volumes remaining below the long-term monthly average of about 65,000. This steady growth may point to signs of demand recovery.
We can also see this positive demand trend in the improving private weekly reservations per site of homebuilders Taylor Wimpey and Persimmon, who reported Q1 trading updates in late April. Similarly, their sales rates have been slowly increasing, though they remain below pre-pandemic levels.
This may suggest that even as homebuyers are getting used to the high rates, a more meaningful rebound in housing transactions and new-home sales may require a larger decline in mortgage rates. Homebuilders’ volume rebound may also need a regulatory shift and an unlocking of the congested planning system.
