A forecast from Savills suggests only 840,000 new homes will be completed in the next five years – well below the government’s target of 1.5 million.
According to a recent report by the real estate adviser, planning reforms will lead to an increase in the supply of consented land ‘but this will take time to feed through into higher completions’.
Low demand for new homes presents a further barrier to growth, the company says, ‘as developers will only build if the demand for new homes is strong enough’.
In the year to March 2024, 198,600 new homes were completed – a 6.5% decline which Savills says was widely anticipated following the end of the Help to Buy scheme in March 2023. The company estimates that completions dropped further, to 180,700 completed homes in 2024/25, based on EPC data.
Dan Hill from Savills research team said:
“Based on current policy and trends, housing completions are likely to remain low, between 160,000 and 170,000 per year over the next few years. While it is possible to exceed this, demand support would be needed. Even with this, delivery will be constrained by the speed at which the housebuilding sector can expand its supply chains and labour force.
“This means completions are still likely to fall short of the Government’s target. At most, we think very significant demand support could push completions to 1.2 million new homes by March 2029.”
Recent planning reform has helped to increase the supply of new homes, Savills acknowledges, but the company says further measures are required that focus on increasing demand:
“While the government has shied away from questions around reintroducing the Help to Buy scheme, house builders are increasingly calling for support. A scheme of similar scale to Help to Buy would generate an increase in new homes sales, and therefore in new homes completions, in the tens of thousands per year. A large increase in grant funding could also enable HAs to take on more homes.”
And, even with funding allocated to new homes, there are limits to the speed at which housing completions can expand due to workforce and supply chain constraints, the report notes:
“Over the last 50 years, in years when housebuilding has been growing, the average rate of expansion has been 7.7% per year. When supported by the Help to Buy scheme, the rate of expansion in the mid-2010s was 10.8% in 2013 and around 15.7% in both 2014 and 2016.
“If housebuilding capacity were to match this peak rate of 15.7% per year for the next four years, we could see an additional 350,000 homes completed by 2028/29. This would mean total delivery of c.1.2 million over the five year period, still short of the 1.5 million homes target – but this would rely on large scale demand support being put in place.”
