It’s been a big year for the new homes sector in the UK. With Labour forming a government in July, focus has been put on the industry as new targets were introduced and major reforms announced. As the year draws to a close, how has 2024 impacted New Homes and what do developers expect to see in 2025?
New Homes in 2024
Perhaps the biggest impact on the new homes industry this year has been the election of the Labour Party into government and their focus on housing. Soon into the party’s term, Angela Rayner made the pledge to build 1.5 million new homes in the next five years, significantly increasing the previous government’s targets.
The government hope to make this possible by conducting a major overhaul of the National Policy Planning Framework, to make the system quicker and easier. They have also pledged £3 billion to help SME housebuilders and Build-to-Rent (BTR) as well as an extra £500 million the Affordable Housing Programme.
Looking at the period between 1 April and 20 September 2024, housing programmes by Homes England achieved more starts on new build homes (up 12%) and more completions (up 32%) than in the same period in 2023. Only time will tell whether this increase is enough to achieve the 1.5 million target or whether the progress can be maintained.
In regard to the build- to- rent (BTR) sector, Knight Frank predicts a record year in 2024, with more than 18,000 homes expected to be completed. Plus, demand was shown to be high with the average time for a BTR home to be let 25% faster in 2024 than 2019.
Looking at schemes intended to help people get on the property ladder, 2024 has been difficult. Following the Autumn Budget, first time buyers will now be more likely to pay more tax on their first home, after the base rate decreases from £425,000 to £300,000 in April 2025. Considering the Shared Ownership schemes, updates have been made to leases to extend them from 99 years to 990 and affordability guidance has been introduced to ensure applicants can pay their mortgage and/or rent. However, this year saw little difference in the number of new shared ownership homes completed (20,364 for 2023-24), compared to the year before (20,497 in 2022-23).
Some developers at least are feeling positive about the shared ownership space. Looking back over 2024, Gemma Robinson, Head of Marketing at developer Aster Group, said: This year has been great for Aster in the shared ownership market. We’ve seen a strong demand for our properties. Although the average share size has been a bit lower than in previous years, this is likely to be because the new shared ownership model allows for smaller shares, starting from just 10% instead of 25%. This change has made it easier for more people to get onto the property ladder with a smaller upfront investment.
Looking ahead to New Homes in 2025
Now that details of the policies have been confirmed by the government, 2025 is due to be the first indicator as to whether the 1.5 million new homes target can be met by the end of this government term.
Since these announcements were made, there has been much cynicism about the ability of the UK to deliver on these targets. Councils have labelled them “unrealistic” and “impossible to achieve”. The Home Builders’ Federation told the BBC the UK doesn’t have enough construction workers to achieve the targets. There has also been concern among communities about the impact the new homes will have on their neighbourhood. Even the Minister of State for Housing and Planning acknowledged that reaching the 1.5 million target over the next 4 years will be harder than anticipated. To meet the target, 370,000 homes need to be built each year. For reference, CBRE reported that only 90,000 new homes were started in the first half of 2024.
Unsurprisingly, developers are more positive about the proposals and are eager to meet the targets given to them. Barratt Redrow told the BBC that they approved of the government’s plans. They believe that the change to become more pro-development will enable the industry to invest in the people and the land needed to increase housing supply and tackle this crisis.
Speaking of 2025, Gemma Robinson said: As we look forward to 2025, we’re excited about continuing to grow and support the government’s targets for affordable housing. The new policies have laid a solid foundation, and we expect them to help even more people achieve their dream of home buying. As a housing association, we know we play a crucial role in providing the affordable homes that are so needed. That’s why our mission remains: everyone has a home.
The build-to-rent (BTR) industry is less enthusiastic. Writing for Urban Living News, Andy Jones, Group Director (corporate and build-to-rent) at Leaders Romans Group, believes the BTR sector will continue to struggle with planning permissions despite reform of the system.
Knight Frank also predict struggles for BTR, including a scarcity of supply and increased pressure to build. There are also questions surrounding the impact that the Renters’ (Reform) Bill will have.
With housing now a key focus of the government, 2025 will be a very interesting year for the New Homes and BTR sectors. With higher targets than ever before, will planning reform and increased investment be enough to achieve them?
