As we countdown the days to next Wednesday’s Budget, probably one of the most anticipated Budgets in a generation, given the government’s doom-laden hints of hardship, here’s some budget wishes from Britain’s volume and SME builders.
Housing and housebuilding have been some of the new government’s stated priorities, the subject of a recent Housing Commission report, so naturally those in the industry, and this includes landlord investors, are anxious to see the outcome.
Knight Frank, a global property consultancy, in publishing its latest Land Index & Housebuilder Survey for Q3 2024, reports on the views from 50 volume and SME housebuilders. In combination, the 50 housebuilders surveyed are responsible for building around 70,000 homes per year in England.
The government’s target is to build 1.5 million homes over the 5 years of the current government’s term. But the findings of Knight Frank’s survey, which asked a significant sample of England’s house builders, shows that most of them are sceptical.
The survey’s findings show that fully 85 percent of the housebuilder respondents thought that the target is over ambitious. That’s because they believe the sector does not have the capacity to deliver more than 1 million homes over that period.
A half-million (one-third) shortfall in the government’s 1.5 million target would be something of an embarrassment. While 45 per cent of those who thought delivering only one million homes would be the limit, another 40% of them thought the sector’s capacity is even lower, able to deliver less than one million homes.
These findings suggest a significant gap between the government’s aspirations and the industry's perceived ability to deliver.
Ahead of the Autumn Budget, Knight Frank says substantial obstacles remain in addressing England's housing needs. If the gap is to be closed between the government’s aspirations and the perceived reality of those in the industry, the Budget of 30 October, must come up with some incentives.
The housebuilders’ wish list coming from the survey gives a focus firmly on government only solutions. Almost 60% of the respondents said they want to see the following:
The move to reinstate mandatory housing targets was seen by a substantial number of respondents as the most effective of the government’s decisions made so far, followed by plans to increase resourcing for planning departments.
Planning constraints were viewed by respondents as a remaining major obstacle to delivering on house building targets. Respondents ranked planning authority resourcing (52%), uncertain timescales for planning decisions, and Section106 affordable housing obligations/viability (both on 43%) as the three most significant obstacles to progressing planning applications.
These sentiments were echoed in the responses regarding the most challenging factors for businesses in the sector, with planning delays overwhelmingly identified as the most challenging (78 percent). Their concerns persist today. When looking ahead to the immediate future, the next quarter, planning delays again are topping the list of anticipated challenges, noted by 75 percent of respondents.
These survey respondents were overwhelmingly calling for a faster planning process, with hard rules surrounding timelines. They want “reasonable” S106 and affordable housing requirements, and a greater emphasis on large dense schemes.
Some of the respondents would like to see reduced involvement of planning committees, and the introduction of zoning rights to remove the highly discretionary nature of the UK planning system.
Charlie Hart, Head of Development Land at Knight Frank has said:
"While our survey highlights industry concerns about meeting housing targets, we firmly believe these goals can be achievable – but only through a fundamental shift in how we approach housing delivery.
“The traditional greenfield housebuilder model is just one piece of a much larger puzzle. We need a multi-faceted strategy that embraces the full spectrum of the market – from Build-to-Rent and affordable housing to co-living and senior living developments.
“London alone has the potential to deliver 80,000+ units annually, with similar opportunities across regional cities.
“Significant global capital stands ready to invest in UK housing – the demand is clearly there; but first we must create the right conditions. Addressing planning constraints, strengthening support for housebuilders, enhancing housing association funding, and introducing smarter buyer incentives are key areas the government should be focusing on.”
Anna Ward, an Associate in the Residential Development Research team at Knight Frank commented:
“The industry's Budget wish list is clear: increased funding for planning departments tops the list, surpassing calls for a revamped First-Time Buyer programme, more incentives and tax breaks to build, and a stamp duty cut.
“In line with this, efforts to liberalise the planning system are seen as the government’s most impactful steps so far. These include reinstating mandatory housing targets to encourage local authorities to approve development, boosting resources for planning departments, and making it easier to build on greenbelt land.”
Knight Frank reports that average England greenfield land values rose 3% on the quarter and annually amid greater competition for sites. However, brownfield and Prime Central London (PCL) prices stayed flat due to thin activity, with some market participants taking a ‘wait and see’ approach ahead of the UK’s Autumn Budget.
Well-located greenfield housing sites are in demand amid easing mortgage rates and better consumer sentiment. Bids are going in for smaller schemes of 50 units through to 900 units plus. There is interest for both consented sites as well as more medium-term planning opportunities.
On top of more immediate greenfield sites, there is also growing interest in strategic land. Developers are taking a longer-term view given the national planning policy framework (NPPF) is set to loosen up restrictions on greenbelt development.
In Prime Central London, values are also holding for good quality sites, with interest in medium to long term opportunities. There is a stronger ‘wait and see’ approach on completed stock in PCL due to current and anticipated non-dom taxation reform.
However, the return of mandatory housing targets could lead to more pressure to relax policies relating to defending offices and see more conversions to residential.
Anna Ward concludes:
“Demand for greenfield sites is rising as housebuilders move to replenish their pipelines. Developers are also eyeing strategic land opportunities, anticipating policy changes that could ease greenbelt restrictions and boost long-term growth."
Knight Frank LLP is a leading independent global property consultancy and has more than 27,000 people operating from 600 offices across 50 territories. The Group advises clients ranging from individual owners and buyers to major developers, investors and corporate tenants. knightfrank.com
[Main image credit - Steffen Coonan]
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