Labour sets out its stall on increasing housebuilding
Plus, predictions and advice across new homes, development, land and planning sectors
8 minutes to read
It is nearly a month after Labour’s landslide General Election win, but it has made bold pledges to boost housebuilding from the get-go. Indeed, this week Angela Rayner, the Secretary of State for Housing, Communities and Local Government, launched its consultation of the National Planning Policy Framework.
Plans include a much-trailed proposal to re-introduce mandatory housing targets, moving the national target to 370,000 additional dwellings each year; reviewing the green belt to identify 'greybelt' land; and ensuring local councils have up-to-date housing plans. The methodology for calculating housing need will also be updated.
The government also announced it would intervene with local councils to ensure housing targets can be achieved.
There will be an eight-week consultation on the National Planning Policy Framework, and the government plans to publish revisions before the end of the year.
The new policies are likely to be supportive for UK housebuilders. The big question is how quickly these changes will be felt on the ground. It is also worth noting that the government has not yet signalled any demand side support – which is hugely relevant given this will have a greater bearing on whether these homes get built.
For now, we have taken the temperature from our team of experts at Knight Frank across new homes, development, land and planning…
Planning – Stuart Baillie
First month impressions We welcome the government's announcement to overhaul the planning system, which addresses many key issues we've long advocated for. The reintroduction of ambitious five-year housing targets and mandatory targets for councils is a positive step towards addressing the housing crisis. A review of greenbelt and the definition of greybelt land is also welcome, though there are concerns about the viability of delivering 50% affordable housing on sites in many locations. The government needs to be pragmatic about balancing much-needed affordable housing delivery with land value, BNG and infrastructure costs. The proposed changes mooted need to go hand-in-glove with strategic regional coordination to achieve the right kind of growth in the right places.
Predictions The government has acknowledged that housebuilding delivery will decrease before it increases. With fewer applications being submitted and more projects going to appeal, combined with a shortage of local plans, a medium-term slump in delivery is expected. However, the recently announced proposals are a positive development and should boost developers' confidence to move forward with their plans.
Advice Don’t wait. Commit to the planning process. It is important to do the groundwork and be persistent because there isn't going to be a fast-track solution agreed anytime soon.
Stuart is a partner and head of our UK planning team
UK regional residential development – Mark Evans
First month impressions How realistic is it to achieve what Labour is suggesting? Housing targets are fantastic but there is a lot that has got to change to get there. Planning is frustrating, there is a lack of resource to process applications. However, there is a massive undersupply of land, so you still have competition for housing sites. More devolved powers for the regions can only be a good thing but it is early days. In terms of the market, we saw positive news last week in terms of five-year fixed rates coming below 4%. A rate cut will give buyers confidence and hopefully indicate the direction of travel over the next 12 months. This will lead to greater volume of house sales and hopefully in turn give developers confidence in delivery.
Predictions I am optimistic as it feels like a rate cut is coming which will inevitably stimulate the market. Affordability of mortgages is current a challenge for buyers. Teams are short of product to sell, and I see this continuing. We need more stock but the cost of delivery in terms of land, build costs and debt remains elevated, so transactions are thin on the ground. We need to see rates start to fall to unlock the market. If this happens in September it will stimulate activity for the rest of the calendar year.
Advice The market has had to realign expectations on pricing. Viability issues exist in every single regional city whether in Bristol at £600 per foot plus or Birmingham at £450 per foot. It is tricky. Those that are maintaining sales rates have had to adjust pricing and that’s linked to affordability, particularly for domestic buyers. But most of these markets are lacking in supply so there is still quite a good opportunity if developers can unlock schemes with grant funding or reduce build costs. Supply is likely to remain restricted therefore developers delivering schemes should see a good opportunity to capitalise as and when interest rates come down over the next 12-18 months.
Mark Evans is a partner and Regional Head of Residential Development in the UK
London (City and East) development land – James Barton
First month impressions Increased positive sentiment, but that is likely down to there simply being a change. There is an attitude amongst developers that it simply “couldn’t get much worse”.
Predictions We have two to three years from now to see a real change, otherwise coming into the second half of their government term there will be more oppressive policies.
Advice Use the time between now and the second week of September to reset, ready for a mild onslaught on the land market between September and the second quarter of 2025.
James is a partner and Head of City and East Land
Prime London development land – Nick Alderman
First month impressions Generally it has been positive on all fronts, the market is happy with a stable government. Labour is talking about things openly and candidly and housing has been forefront of their thinking in these first four weeks. It is good news that each London borough is set to have mandatory housing targets, this may relax some policies relating to retaining office space and we may see more conversions to residential.
Predictions I think we will potentially see more permitted development from office to residential. Good quality sites will sell well in Prime Central London (PCL) and values will hold. Since January we have seen an uptick in deals completing compared to last year. On the sales side, there is some hesitancy due to non-dom reform, but land is a medium to long term play - particularly if a site does not have planning - so this is less apparent.
Advice Now is a good time to be buying land, several parties have called the bottom of the market and have active mandates to re-stock land pipelines.
Nick is a partner and Head of Central London Land
London new homes – Pryia Black
First month impressions Sentiment has been more positive, and we have seen a notable increase in activity as of last week. That said, it is hard to get an accurate judgement on whether this trend will continue over the August holiday season. Interestingly, we are seeing more demand from British owner occupiers. We are seeing activity on everything from smaller boutique schemes to larger developments such as King’s Cross, within a wide range of price points.
Predictions I think activity levels in September will be key in providing an indication of future market trends. We are hoping for a busier August than normal given the increase in number of people transacting in late July. Demand for build complete stock is expected to be strongest, as has been the case so far this year. Buyers need to have confidence that the product is being delivered and they also can find comfort in knowing what mortgage rates to expect on completion.
Any uptick in permitted development from office to residential will help relieve the supply crunch a little and could lead to more boutique residential developments, which are in demand.
Advice On the developer side, we would encourage our clients to be adaptable on pretty much everything, such as being realistic with pricing and more flexible with exchange deadlines, payment and deposit structures.
Priya is a partner at Knight Frank
London new homes - Emma Fletcher-Brewer
First month impressions Sentiment wise, people are feeling more settled. The market for build complete stock remains steady, largely thanks to some more stability in mortgage markets as well as continued demand from needs-driven buyers. So far, the prospect of higher stamp duty for overseas buyers hasn’t really had an impact – the proposed 1% increase is still lower than what buyers would pay in many other global markets.
Predictions Where developers have changed fee structures and included discounts, schemes are selling well. It’s likely we’ll see a little more price adjustment as a result. More boutique schemes are also appealing to buyers. International buyers will continue to focus on the upper end of the new homes market, but there is an undersupply at the very top end. It will be interesting to see how this pans out given there is not a lot in the pipeline.
Advice Developers need to make their launches stand out by thinking outside the box. The most effective marketing campaigns are both innovative and cost-efficient. Developers need to be standout on their launches and think outside the box. The best marketing campaigns are both forward thinking and cost effective.
Emma is a partner at Knight Frank