There will be a huge cross-section of people awaiting the upcoming Budget with a heady combination of bated breath, expectation and hope. None more so than a housebuilding sector which has experienced an extremely challenging 12 to 18 months.
A period which saw the number of new home completions, profits and share prices all dwindle to varying degrees in the wake of lingering economic uncertainty, rising interest rates, inflationary pressure and affordability concerns.
The spotlight on housebuilders has increased over this time and especially in more recent weeks with Barratt agreeing to buy competitor Redrow in a deal worth £2.5bn.
The acquisition of Redrow’s entire share capital will create a housebuilding giant with a combined turnover of £7.5bn. The pair between them delivered more than 22,000 homes last year.
The board of Barratt said the move, which will require approval of shareholders and regulators, will generate pre-tax cost savings of at least £90m a year by the third year after the completion.
This is certainly an eye-catching move for the new build sector as such a deal could see the combined group leverage the respective strengths of both companies to generate significant benefits to its people, its supply chains, and – most importantly – its customers.
Exactly how this pans out remains to be seen, but if it serves to accelerate the delivery of the new homes then it has to be a positive move. After all, it’s no secret that we need to build more homes across the UK. Figures released by The Department for Levelling Up, Housing and Communities (DLUHC) in late November 2023 showed that annual housing supply in England amounted to 234,400 net additional dwellings in 2022-23, similar to 2021-22, consisting of 212,570 new build homes.
This is well below the long-standing 300,000 government target, although this is a figure which has recently been scrapped. It’s also even further behind findings from the Centre for Policy Studies which suggests that over 500,000 homes are needed each year to meet increased demand relating to rising net migration rates.
Housebuilding figures will always be up for debate. However, it’s clear that new build remains at the forefront of all energy efficiency conversations from both an environmental and cost standpoint.
With energy bills rocketing, the attraction of such properties has risen substantially. Especially coming out of lockdown where there was a race for space and location, a trend which suited many new build developments across the country.
This is in addition to the age-old benefits of no upward chain, greater buying certainty once a deal has been agreed, plus the peace of mind generated by a 10-year structural warranty.
The Government’s long-awaited consultation on the proposed Future Homes Standard (FHS) will also help ensure the delivery of energy efficient properties into the UK housing stock.
In addition, it’s a huge positive to see a growing number of developers registered with the New Homes Quality Board and their commitment to improving standards, championing quality new homes and safeguarding better consumer outcomes.
From a lending viewpoint, to help meet ever-changing market dynamics, we’ve established a dedicated specialist new build support team.
This team was formed as a direct result of intermediary feedback to help pre-submission, during the valuation process and in delivering priority escalation routes through to extensive post-offer assistance. We will also continue working closely with key internal stakeholders and external parties including house builders, housing associations and valuation suppliers, in addition to supporting a variety of industry initiatives to further strengthen our new build proposition going forward.
All of which will help us to provide even stronger levels of support for this sector in 2024 and we hope that the Budget will also deliver some carefully measured schemes or programmes to help bridge an ever-widening housing supply gap.
Matt Aston is head of new build at Barclays
