New Homes

The need for resilience

published by

Fran Puddefoot

The development industry faces three challenges: meeting buyers’ evolving priorities, adapting to changes in Help to Buy and ensuring that supply is not adversely disrupted.

 

Buyers’ evolving priorities

This year, people have spent much more time in their homes than they might have expected. This has prompted greater introspection about our homes and what we want from them. Whether this shift is here to stay depends partly on how long the pandemic continues.

While we live in times of social distancing, space to work at home, outdoor space and our local environment have become increasingly important. Buyers are placing greater priority on home offices and faster internet connections; 57% and 48% of buyers are considering a separate space to work at home and good internet more important, according to the Savills June survey of buyers. Outdoor space has increased in importance even more, with 62% of Savills buyers considering it more important and 60% of Redrow’s new home buyers listing it as the highest priority characteristic.

 

Local amenities and a sense of community have become more important too, as has energy efficiency, with 27%, 38% and 39% respectively considering these things more important.

Therefore, in the short term, ensuring more new homes are energy efficient with access to outside space and space to work from home in environments that have a sense of community and amenities will support demand.

Demand for homes has been very strong in the traditional London commuter locations (see Savills blog ‘Where’s hot in the current market’), so we need to continue to deliver homes in these places.

In the longer term when social distancing is no longer required, space to work at home, whether a designated room or flexible layout, will still be desired as we expect that working at home for part of the week will remain. Unlike existing stock, there is the opportunity to adapt new homes to meet these preferences. The challenge will be keeping these new homes affordable despite the higher costs to build them.

 

 

The end of Help to Buy

Before the lockdown, the new build sales market had been performing more strongly than the second-hand market, mostly thanks to Help to Buy. In 2019, 15% of all sales were new homes, compared with just 10% in the period 2010–2012. The Help to Buy scheme has allowed many people to get on to the housing ladder who otherwise wouldn’t have been able to or for buyers to purchase a bigger property, taking two steps up the ladder in one acquisition.

However, as Help to Buy in England becomes more restricted from next year and is scheduled to end in 2023, the new build market will be back on a level playing field with the second-hand market, unless other financial support for buying new homes is available. Building homes to suit the changing buyer preferences and broadening the offer and target market for new build are therefore opportunities to support sales (The right homes for different people).

Meeting housing targets

Housing supply has been significantly disrupted by Covid-19, and we estimate that 17% fewer homes will be built in the 12 months to March 2021 than last year. However, with starts of new sites running at around 47% of pre-Covid levels, there is a significant risk to delivery in 2021–2022 unless builders gain more confidence.

To reach the target of delivering 300,000 homes in England by the mid-2020s and the number of homes needed in Scotland and Wales, delivery of all tenures will need to increase. The new build market share of the sales market will need to avoid falling back to pre-Help to Buy levels of 10%. And enabling the build to rent sector to expand will be essential.

Delivering this volume of homes will require diversity in construction, such as greater use of modern methods of construction (a less labour-intensive way of building homes). This will be needed because of the existing skills shortfall and potential for fewer construction workers from outside the UK in the future due to Brexit.

Housing supply in England to meet targets, delivery of all tenures will need to increase

Authors:   Lucy Greenwood, Director, Residential Research and Consultancy and Charlotte Heffernan, Research Analyst, Residential Research

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