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3 hours ago
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This is what the government didn’t want to hear when its target to build 1.5m new homes in England during this parliament already looked out of reach. The country’s biggest housebuilder is trimming its purchases of new land because the Iran war has created “a less certain backdrop”.
Barratt Redrow’s “disciplined approach” isn’t a downing of tools, it should be said. The company had previously expected to buy between 10,000 and 12,000 plots; now it will acquire between 7,000 and 9,000. In money terms, it equates to about £100m less from a £800m-£900m budget. It is a scaling-back, as opposed to the outright halt to buying new land that London-focused Berkeley Group announced a couple of weeks ago.
The point, though, is that the government – if its 1.5m target were to remain remotely plausible – needed the big housebuilders to be pressing the accelerator at this point. The outcome for new houses in 2024-25, even on the flattering “net additional dwellings” measure, was 208,600, down 6% on the previous year and massively below the required annual average of 300,000.
The shame is that the dial seemed to be moving in the right direction before the Middle East conflict, albeit still too slowly. Barratt reported recent “solid” trading its latest quarter and its completions should still be higher by about a thousand over the full financial year to between 17,200 and 17,800.
But the new corporate caution on buying land is only logical. If interest rates, and thus mortgage rates, aren’t going to fall this year, that represents a fundamental shift in the housebuying weather. On top, energy costs are rising, which feeds into building material costs, with the impact felt into 2027. Then there are the taxes that housebuilders always grumble about – the residential property developer tax and so forth – that affect a site’s viability.
One can’t weep for a company that should still make £570m-ish of full-year profits at decent margins, but the cooling in the market conditions is undeniable. Put another way, the government was foolish to set its ambitious 1.5m target in the first place. It made itself a hostage to events outside its control.
The part of the script that has gone well is planning reform and the reintroduction of hard targets for local authorities. That effort has been applauded as far more likely to be effective in improving the country’s housebuilding capacity than anything the Tories did in their final years in office. But the harder part is whipping local authorities to turn plans into action. That takes time, as always seemed likely. Now the knock-on effects of the Iran war will act as a further brake.
One of the industry’s proposed remedies – as usual – is more support for housebuyers, or a reheating of George Osborne’s Help to Buy mortgage schemes. The twist this time is that housebuilders would contribute and assistance would be more tightly targeted at first-time buyers. There is one enormous problem, however. The Treasury will fear the possible inflationary effects. The chances of the idea being adopted in the next 18 months are surely slim.
So, come 2029, a possible final result could look like this: the government will have done everything it promised in terms of speeding up planning, and the reforms may even be working well at that point. But the 1.5m figure will still be missed by a mile. Unfortunately, it’s the miss on the big number that tends to be remembered. It was not smart politics to set it in stone.
