"Despite a lacklustre Budget, early signs are suggesting a market rebound, and 2024 is shaping up to be a more positive year than initially anticipated."
The new homes market has gotten off to a brighter start than expected. While affordability is still a concern, buyer sentiment is improving, which is especially promising given the recent economic hurdles.
However, the recent Spring Budget didn't offer much support for the housing industry, particularly housebuilding. We still need more government initiatives to streamline and improve accessibility into the new homes market. Despite a lacklustre Budget, early signs are suggesting a market rebound, and 2024 is shaping up to be a more positive year than initially anticipated.
A retrospective glance
While 2023's first half presented a challenging market landscape with fluctuating interest rates, evolving buyer preferences, and overall economic uncertainty, new homes sales figures held firm, exceeding some initial concerns.
Additionally, the new build market has demonstrated resilience despite a decline in new home registrations. This slowdown in registrations likely stems from a confluence of factors, most significantly the affordability challenges posed by current economic conditions and the expiration of schemes like Help to Buy, which saw 387,195 properties bought through the programme, 328,346 of which were first-time buyers.
The here and now
2024 has brought a significant rise in enquiries (10.7% year-over-year), with a healthy mix of first time buyers and existing homeowners in the mix.
That being said, affordable housing remains a priority. Over 35% of our first time buyer enquiries focused on affordable options, which only highlights continued demand. While there's still room for increased consumer education, particularly regarding the shared ownership scheme, we're committed to helping people access homeownership, and buying schemes and incentives offer an initially cost-effective way to achieve that dream.
Breaking down the Spring Budget
In terms of housing, and the new build market in particular, the Spring Budget left many disappointed. In the run up to the announcement, we saw intense speculation surrounding the housing industry - with many anticipating the introduction of 99% mortgages to ease affordability concerns.
This was not the case, however. Instead, the budget was notably light on housing updates, a tough pill to swallow in today’s climate. Additional funding to the tune of £242m was announced to build ‘nearly 8,000’ new homes in the Canary Wharf and Barking areas of East London - on top of the £188m already set aside for new properties in Sheffield, Blackpool, and Liverpool.
While this can be seen as a positive, it doesn’t do anything to ease affordability for first-time buyers, as the average house price for a property in Canary Wharf is £695k for a detached house, £728,750 for a semi-detached house, £808,125 for a terraced house, and £538,861 for flats.
Also included in the budget was a cut to the higher rate of Capital Gains Tax (CGT) from 28% to 24%. Some see this as a positive move, as it may incentivise landlords to sell and free up more properties for those looking for long-term lets and ease some of the supply issues seen in the private rented sector (PRS).
Shifting rates and drops in inflation
Whilst the spring budget didn’t pack the punch we’d have liked, there is still good news in the industry. The recent drop in inflation from 4.0% in January to 3.4% in the 12 months to February could spell good news for those hoping for lower mortgage interest rates.
As we edge closer to the BoE’s 2% inflation target, it's possible rates will start to come down in the near future, with some economists expecting this as soon as June. This would hopefully ease some of the affordability concerns of those looking to buy a new build property.
Lack of housing supply & energy grid issues
Whilst the first three months of this year are looking positive and those in the new homes industry are looking at the rest of the year with cautious optimism, there are still plenty of issues in the space that need to be addressed.
A huge talking point for new homes (and the upcoming election) is the use of brownfield sites. Currently, the incumbent government is undergoing a consultation process for strengthening planning policy for brownfield development. The consultation, conducted by the Department for Levelling Up, Housing & Communities, began on 13th February and closed on 26th March. This is good to see, as actively involving affected parties is key to improving brownfield development.
In the 2019 Conservative Party manifesto, the current government set a target of building 300,000 new homes a year by ‘the mid-2020s’, but without intervention from lenders and the government, this target is unfeasible. On top of that, the current ‘infrastructure crisis’ on the National Grid, pushes these numbers even further out of reach.
However, despite this target set in the 2019 manifesto, it’s looking more and more likely that the Labour Party will be the next government - with the latest polling data projecting that Labour will win 403 seats, whereas the Conservatives are only projected to win 155 seats in Parliament.
In October 2023, the Labour Party pledged their ‘housing recovery plan’ to initiate over the course of the next Parliament, building 1.5m homes. This involves a ‘blitz’ of planning reform to boost housebuilding across the UK, planned ‘new towns’ - community-building with new builds and green spaces, and also offering young first time buyers the ‘first chance at homes in new housing developments’ using a government-backed mortgage scheme.
Hope on the horizon
Despite the lack of substantial support in the recent spring budget and the ongoing grid infrastructure limitations, the new homes market is showing positive signs for 2024. Affordability remains a key concern, but with rising enquiries, a healthy mix of buyers, and a potential decrease in interest rates later this year, there is cause for cautious optimism. The government's focus on brownfield development consultations is a welcome step, but significant intervention is needed from all stakeholders to address the housing supply shortage and unlock the full potential of the new homes market.
