background

Residential

UK Construction Intelligence Report

Overview

image

Early indicators suggest that capital housing values in the UK will drop in 2020/21 as a result of market influencers such as (but not exhaustive) Covid-19 the global pandemic, Brexit uncertainty and having entered a recession. Savills report on average a -7.5% drop across the UK.

Whilst this is concerning, it does however create an opportunity for those with capital/ equity, especially as the five-year forecasts on values suggest sustainable growth, typically +3 to 4% pa in the Regions. The London market will be more challenging with a likely hood of only +1% pa growth over the same period 2020 – 2024.

In order to stimulate sales we have seen Government intervention with Rishi Sunak announcing changes to give property-buyers a holiday from Stamp Duty Land Tax (SDLT) in 2020 to revitalise the UK economy. The new measures coming into effect from the 8 July 2020 until the 31 March 2021 inclusive. The headline of Sunak’s announcement being Zero % SDLT on homes up to £500,000.

Zoopla the property website platform has stated that the changes introduced have benefitted London most and had little impact elsewhere so far. In reporting by the Guardian, they quoted Zoopla “In a reflection of the disproportionate benefit for wealthier buyers, agreed house sales in the capital jumped by 27% in the first two weeks of the stamp duty holiday”.

With existing measures in place to help first time buyers, who on average already paid no stamp duty (excluding London) it is difficult to see how this initiative will help new people onto the property ladder and it is forecast that the cost to the exchequer (public purse) will be in excess of £3.8bn.

The Ministry of Housing, Communities & Local Government live tables of housing data inform us that over the last 10 years or so the % of dwellings which are owner occupied have been gradually falling, which therefore means a greater proportion of homes sit within tenures such as Privately Rented or Rented through Public Sector bodies such as Housing Associations.

image

In London specifically we can see that in 2009 52.2% of dwellings had been owner occupied with this falling below 49% by 2019. Around the millennium it had been as high as 59% so a 10% drop in approx. 20 years.

The trend for us to rent is evident, either by choice or necessity. It is apparent across the UK and follows activity seen in the USA and across much of mainland Europe. Stimulating and accelerating the UK Build to Rent (BTR) and/ or Public sector affordable housing (of varying tenancies). It should therefore be of no surprise that many sector analysts and experts have been commenting on the growth and invest ability of the UK’s BTR stock (both in dense apartment schemes but also in low rise housing). We have also seen a swelling of support for the delivery of more good quality, affordable homes to meet the needs of our key workers in the Homes for Heroes’ campaign (the creation of 100,000 new homes).

The Government target of 300,000 new homes per annum is being missed. The Independent reported that UK housebuilders continue to lag way behind Government targets of 300,000 new homes a year, despite completing the highest number of homes since 2007 last year. The National House Building Council (NHBC) advised that 161,022 homes were registered in 2019. Across the UK this is only a 1% rise from 2018. The disparity between Regions is quite noticeable with analysis over the past decade the better performing Regions being the West Midlands (>169%) the North West (>148%). Year on Year 2018 to 2019 London registrations rose by >37% with the growth in affordable and rental new homes >42%.

Whilst the Residential sector remains robust, especially when seen through a medium- or long-term lens it does have its challenges, like all sectors. There will continue to be a fight for the best people in the market, and availability of labour and professional resources against the backdrop of a UK skills shortage in the Construction and Property sectors.

Whilst the Residential sector remains robust, especially when seen through a medium- or long-term lens it does have its challenges, like all sectors. There will continue to be a fight for the best people in the market, and availability of labour and professional resources against the backdrop of a UK skills shortage in the Construction and Property sectors.

Ultimately the barometer of success for Residential will be measured on the ability to deliver new homes which meet the needs of all in terms of quality, sustainability and affordability, whilst protecting and maintaining our existing stock through maintenance, renovation and redefining.