Real estate agency Savills said that a combination of lower demand for new homes, providers’ reduced ability to deliver affordable housing and a “dramatic” reduction in planning consents would compromise new home delivery from 2024/25.
These factors, it said, would lead to an average of 170,000 homes being built per year during the second half of the 2020s, with “no current policy proposals that look likely to turn the tide”.
Savills said that given the current policy landscape, including a poorly performing planning system and the discontinuation of Help to Buy new private home sales would likely only yield around 100,000 new homes per year during the second half of the 2020s.
This could increase to 140,000 to 160,000 new home sales per year by the late 2020s if the planning system were to support a greater volume and range of sites.
Savills said that affordability “must play a central role in rebuilding the pipeline”. Against the government’s 300,000 homes a-year target, this would mean delivering 120,000 to 140,000 new affordable homes each year, with a high proportion being for social and affordable rent, “which can be quickly occupied by lower-income households”.
Meanwhile, Build to Rent, which Savills noted was a growing tenure for delivering homes, was likely to only produce around 20,000 homes per year by 2030. Volumes in this sector remained “relatively small”, with the investment market facing challenges over the past two years.
Savills also said that currently, housing supply was showing a delayed reaction to the trials of the last two years, including higher interest rates.
It explained that volumes had been maintained, firstly through the completion of homes that were sold off-plan in better market conditions. Build-to-rent completions had also seen a “good year” and housing associations had delivered more affordable housing through homes intended for private sale.
But the outlook for housing delivery this year and beyond “is extremely poor”. Savills pointed to NHBC data revealing that in the year to March 2024, private starts fell 26% against the previous year. Those for affordable and Build-to-rent homes dropped 13%.
It also referenced the G15’s open letter to the levelling up secretary, which warned that London starts by its housing association members plummeted 76% in 2023/24 against the previous year. Outside the capital, they were 37% down.
Savills also referenced provisional government data for Q4 2023 showing that new home starts were 52% below the Q4 average over the past ten years.
“Overall, we think new home completions could fall to just 160,000 in 2024/5,” Savills said.
Separately, Savills now expects UK house prices to grow 2.5% in 2024 after November’s forecast of a 3% decline for the year. This upward revision reflects falls in the cost of mortgage debt.
It also now expects house prices over the next five years to grow 21.6% against the original forecast of 17.9%.
