New Home Sales to Sink Further as Property Crisis Deepens

Sales of new homes are expected to plunge by more than 50,000 a year as onerous planning regulations and turmoil in the property market take their toll on development.

New build sales could fall from 145,000 to 90,000 a year, or even more sharply, according to Savills. At the end of last year, the average rate of house sales dropped to the lowest level since the last financial crisis, a report by the estate agent found. Developers have been hit hard by falling demand for new build homes and red tape in the planning system. The number of sites gaining planning consent for new homes has plunged by nearly a third over the past five years.

Meanwhile, demand has fallen because of higher mortgage rates and the end of the Help to Buy Scheme. Help to Buy, which closed to new applications in October, supported first-time buyers seeking to purchase a new home by contributing towards the cost of a deposit. Under the scheme, they received a 20% loan - or 40% in London - that was interest-free for five years, which allowed them to get on to the housing ladder with just a 5% deposit. The scheme was introduced in 2013 after the financial crisis to help boost demand for new homes, but experts have accused it of inflating house prices.

Savills said the Government’s target for developers to build 300,000 homes per year is unattainable without intervention. The estate agent called on local planning authorities to give consent to more sites. It also said the loss of Help to Buy means that new homes will need to appeal not just to first-time buyers, but to the widest possible range of homeowners. Developers had called on the Government to introduce a new version of the scheme in the Budget but the appeals were ignored by the Jeremy Hunt, the Chancellor.

Without a replacement for Help to Buy, Savills expects new build sales to be lower than before the last financial crash, in line with wider housing market activity. Despite a lack of new homes being built, Rishi Sunak, the Prime Minister, ditched mandatory local housebuilding targets in the face of rebellions from backbench Tory MPs. He was forced to change course after 60 Conservative MPs threatened to veto his flagship Levelling Up and Regeneration Bill.

The government’s failure when it comes to housing delivery is clear for all to see

Despite whisperings of new housebuilding targets being set by the government, historic figures show these are likely to amount to little more than false promises following their failure to hit their previous targets by quite some margin. Fresh analysis by Sirius Property Finance looked at historic dwelling completion figures across England stretching back to the late 1970s, before analysing dwellings built versus the 300,000 target set out by the government and chancellor Phillip Hammond in November 2017.

The government recently made the decision to scrap their housebuilding target of 300,000 homes, a target that was originally set out in the 2019 Conservative manifesto and to be reached by the mid-2020s. When it was first unveiled by the then chancellor Phillip Hammond in November 2017, there were some 162,470 homes built across England that year – 46% off the pace of their intended target for the future. This total grew steadily to 177,880 homes built in 2019, the highest total seen since 2017 but still -41% below the 300,000 target.

The impact of the pandemic then saw this total fall to 146,630 homes in 2020, less than half of the government’s annual target, before climbing to 174,930 new homes delivered in 2021. However, it is estimated that just 170,200 new homes have been built across England in 2022, a 3% year-on-year decline in output and 43% below the annual target of 300,00 homes. Since 2020 when the government intended to hit its target of 300,000 new homes a year, just 491,760 of the proposed 900,000 have been built.

In fact, the government hasn’t come close to hitting this annual target in the last 45 years, with the highest level of housing delivered in a single year coming in 1978 when 241,310 homes were built. The MD of Sirius Property Finance, Nicholas Christofi, said, “the government’s failure when it comes to housing delivery is clear for all to see and and it’s even more disappointing still that they have chosen to throw in the towel and water down these targets, rather than commit to solving the housing crisis. We expect it will be this lacklustre approach to housebuilding that is unveiled in this week’s spring statement, rather than a new commitment to a more meaningful target. Of course, given their historic failures, it’s fair to say that any ambitions they may have are likely to amount to little more than recycled rhetoric, rather than actual homes built.”