Private housebuilding recovery signals boost for construction

The recovery in new private housebuilding activity seen over recent months is likely to continue to gather pace. 

The Budget hit housebuilders’ share prices as the government’s extra borrowing plans mean mortgage rates are likely to fall at a slower rate than had been hoped, despite the cut in base rates to 4.75% earlier this month. But private housing is still amongst the most promising sectors for new construction work.

As a more favourable planning regime under Labour starts to take effect, private housebuilders are getting set to start work on more new sites, particularly in the South East and East of England.

October’s edition of the Glenigan Construction Review shows that residential main contract awards in the three months to the end of September were worth £14.23 billion, up 30% compared to the period last year and 6% up on the previous three months.

The upturn is in keeping with the June edition of the Glenigan Construction Industry Forecast 2024-26 which sees an improvement in affordability and economic prospects driving higher private housebuilding activity. After a 2% increase in the value of underlying private housing starts this year, it predicts a 14% increase next year and a further 6% rise in 2026.

The improvement comes amidst a brightening outlook for the UK housing market. Mortgage approvals reached a two-year high of 65,647 in September, according to the Bank of England. Meanwhile, house prices rose at the strongest level in almost two years in September, according to Nationwide. Overall, house prices rose by 3.2% in the year to September, with marked increases in the North West, Yorkshire & Humber, and Scotland.

The industry’s medium-term work pipeline has been bolstered by the government’s new national planning policy framework which brings back mandatory housing targets for local authorities and obliges them to permit development on brownfield land in the green belt and on the ‘grey belt’. It includes a target to build 1.5 million homes in the next five years. (Although the Office of Budget Responsibility expects the figure to be nearer to 1.3 million.)

Budget boost

Private housebuilding also stands to benefit from measures in the Autumn Budget. These included a £3 billion fund for cheap loans for private rental or schemes by smaller developers along with £50 million to accelerate planning and the recruitment of some 300 new planners.

The Budget statement noted the government’s recent approval for three major sites in Cambridgeshire, West Sussex and Durham which it said would lead the way to ‘thousands of new homes’.

Glenigan data highlights details on major developments in the pipeline in those areas. They include the £223 million Ford Airfield site near Arundel, (Project ID: 18397555), the £397 million Sniperley Park scheme in Durham involving some 1550 homes (Project ID: 16008619) and the £600 million Waterbeach New Town East scheme near Cambridge (Project ID: 18202580) involving 4,500 homes.

The Budget also confirmed £56 million of investment for a scheme to unlock over 2,000 new homes at Liverpool Central Docks (Project ID: 18438915).

Housebuilders have significant numbers of plots which already hold planning permission in their existing land banks to meet extra demand for new homes. Bellway’s land bank, for example, includes almost 31,000 plots which have implementable detailed planning permission.

The government is also keen to boost social housing, reflected in an extra £500 million for up to 5,000 affordable homes announced in the Budget.

But new private housebuilding currently accounts for the lion’s share of new activity in the sector; some 57% of work starting on site in July-September, according to the October Glenigan Construction Review.

Housebuilders have been busiest in the South East. The region saw a 38% rise in residential starts in July-September compared to a year earlier and accounted for almost a quarter of all starts in the sector.

The East of England has also been fertile territory for housebuilders with residential starts in the three months up 37% on the period last year.

Improving pipeline

Today, the private housing work pipeline is also showing marked signs of improvement in other areas.

In London, detailed planning approvals for housing schemes rose dramatically in July-September to £2.75 billion, up 76% on the period last year.

One significant project in the capital highlighted by Glenigan data where detailed plans have been granted by Brent Council is a £101.6 million scheme of over 500 co-living plus 100 affordable homes in Brook Avenue, Wembley (pictured). Work on the scheme which involves a series of linked multi-storey blocks for developer Wembley Brook Properties is due to start next spring, subject to approval by the Greater London Authority. (Project ID: 23246824).

Meanwhile, in the North West, housing approvals rose by 58% to £2.66 billion over July-September, a 58% rise on the period last year and boosted by the major £570 million Crown Street Phase 3 development in Manchester (Project ID:23217562).

Elsewhere in the region, Countryside Partnerships has been granted detailed plans for a significant development of 477 build to rent homes at Collingwood Park at Darwen in Lancashire. Work on the scheme is set to start early in the new year and run for 39 months (Project ID: 20355798).