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UK housebuilders have warned that it will take at least a year to start increasing housing supply, with output expected to fall this year, underlining the scale of the challenge facing the new Labour government in its mission to “get Britain building”.
Barratt, one of the country’s largest developers, warned last week that it would build fewer homes in the coming year, as it tries to catch up from a slowdown in land buying and new site openings triggered by a market slump.
That comment was echoed by MJ Gleeson, a smaller builder focused on the north of England, which told the Financial Times a market recovery was taking longer than expected, adding it was not expecting completions to pick up until the second half of next year.
The lag in output heaps pressure on the government’s target to build 1.5mn homes over the next five years to tackle a national housing crisis, a plan that is dependent on commercial housebuilders delivering more homes.
Aynsley Lammin, analyst at Investec, said hopes that the industry’s output might start to recover in 2024 have “definitely been pushed into 2025”, and that adding volumes would likely “be ramping up more meaningfully from the second quarter of 2025”.
“It will . . . take time for the planning changes to work through the system and for the housebuilders to react to get more sites opened,” he added.
The extended timeline for a recovery in new construction follows an almost two-year lull that is expected to continue even as the housing market stabilises on the expectation that interest rates will start to fall.
As one of its first announcements after sweeping to power, Sir Keir Starmer’s administration announced measures to unclog Britain’s deadlocked planning system in order to boost housebuilding to more than 300,000 homes a year — a target that has not been met for almost half a century.
However, the government will face an uphill struggle to meet that target, with Savills projecting that completions will fall this year. Newly built homes sold by large developers account for by far the largest component of new supply, with Savills predicting that new homes for private sale will drop to about 100,000 in the 12 months to March 2025, from an estimated 115,000 a year earlier — compared with an annual average of 140,000 in the three years to March 2023. Official figures will be released in November.
Barratt expects to deliver between 13,000 and 13,500 homes by the end of June next year, down from 14,004 the previous year. It blamed the fall on “temporary” delays in opening new sites after buying less land in the past two years amid a slump in demand from buyers.
Most big developers halted land buying and slashed their output immediately after the disastrous mini-budget in the autumn of 2022, which pushed up mortgage rates and crashed the home sales market.
“We can turn the tap off pretty quickly. We can’t turn the tap on very quickly,” said Graham Prothero, chief executive of MJ Gleeson.
He said that the sales market had been “more challenging . . . than I think most of us expected” but that “from our perspective, it is less down to markets and more down to the sheer practicality of getting sites open”.
Although speeding up planning approvals will help developers, Greg Fitzgerald, chief executive of FTSE 100 housebuilder Vistry, said the key factor in how much the industry will build is sales.
“All housebuilders can build quicker than they currently are,” he said. “But they are only currently building to the level they can sell.”
Rebuilding the skilled workforce necessary to deliver many more homes could also prove a brake on the recovery as it gathers pace.
“As of today, I don’t have a problem,” said Prothero. “If over the next 12 and 24 months, with the commitment of the new government, people look to ramp up volumes considerably, then [labour force] could very rapidly become an issue.”
