UK development: an optimistic year ahead?

2024 posed many challenges for UK developers. Debt finance was expensive and in short supply. Construction costs remained high and the labour supply was limited due to a combination of Brexit, an aging workforce and low numbers of young people joining the industry. Compliance with new regulations, including the Building Safety Act, added to build costs and required schemes to be re-designed. Political and economic turbulence, both internationally and domestically, affected confidence. Initial excitement about the new government was dampened by the long wait between the election and the Autumn Budget, and the digestion of the hefty fiscal policies then announced. 

All of this resulted in a fairly quiet 2024 development market, as developers adopted a ‘wait and see’ approach, or were simply unable to put together viable schemes. This was reflected in planning approvals hitting a record low, with planning permission granted for just 2,260 homes between July and September.  

However, the new government has outlined ambitious plans to ‘get Britian building again’, with particular focus on housing and infrastructure. This includes a return to mandatory housing targets for local authorities, with an annual national target of 370,000 homes, a promise of 1.5 million homes by 2029, and the introduction of new classification of land – “the grey belt”. 

Whilst the ‘brownfield first’ approach remains, the updated planning framework requires councils to review their greenbelt boundaries to meet the new targets, identifying and prioritising lower quality ‘grey belt’ land (as discussed in our article). A taskforce has been set up to identify possible locations for new communities of at least 10,000 homes, the so called ‘new towns’. 

As things currently stand, it feels like we are a long way off seeing these initiatives triggering a significant uptick in development; the level of housebuilding being targeted hasn’t been achieved since 1969. Some analysts have suggested that, to meet the new housebuilding targets, we need a 39% increase in output, with 149 homes constructed each hour, and 1,195 each day, during a normal working week.

Nevertheless, it is hoped that 2025 will bring stability, as the UK emerges from a prolonged period of uncertainty in which numerous challenges (including COVID, Brexit, Liz Truss’ mini budget and a looming general election) harmed developer confidence. But despite this and the government’s reforms to the planning system, it feels like there’s a long way to go until we see a substantial increase in new development. 

The industry continues to face challenges: funding issues remain as a result of scarcity and relatively high borrowing costs, there are question marks over the capacity of the industry’s workforce to deliver significantly higher volumes of development, construction company insolvency remains a key risk and many affordable housing providers are hampered by remediation issues relating to their legacy stock. 

Perhaps we’ll see a material uptick in development towards the end of the decade, but 2025 feels like a year for taking stock of the current political and economic landscape, rather than a year of spades in the ground. 

Authored by Lauren Addy.