Savills has reported that the UK housebuilding market may not recover until 2026. Various causes are suggested, including the pandemic (unsurprisingly) and, in keeping with other sectors of the economy, labour shortages (in this case roof tilers and bricklayers as well as driver shortage and fuel disruption). The economic and market pressures follow the Prime Minister's suggestion that there will be no new homes on green fields (though this has been met with some scepticism) and the ongoing uncertainty around possible planning reforms.
Interestingly, the report suggests that the challenging market conditions (particularly whilst trying to bring forward those schemes, often smaller, which will allow for delivery before the end of the Help to Buy Scheme in 2023) may assist the rental market and create opportunities for build-to-rent developers. Those working in BTR may find the market conditions to be the second piece of good news, coming alongside the recent confirmation of BTR's exclusion from the residential property developer tax (please see here for a general examination of the draft legislation by CRS tax partner, Helen Coward).
Although the market is challenging, however, there are clearly encouraging signs. Developers will have been pleased with the recent debunking of the land-banking myth by Lichfields. Despite issues across the industry in getting schemes through planning (caused by various issues, including the lack of funding for local planning authorities), Bellway (for example) has just announced its expectation for growth over the next two years (Bellway aims for £1.25bn profit over two years for the housebuilder | Evening Standard) confirming that, even though the stamp duty land tax holiday has ended, customer confidence and demand remains strong. For the smaller housebuilders, Housing Growth Partnership has announced an addition £300m of funding (see here for more details), which may go some way to helping bring forward the smaller sites referred to above.
Whilst it's not quite happy hour again, it is also not all doom and gloom as we head into the Autumn.
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The UK housebuilding market will not recover until 2026