Over the past couple of years when covering the housebuilding sector, MS has invariably written about a ‘subdued’ market that has notably lagged other construction areas such as civil and commercial.
In recent months, however, there have been signs of UK housebuilding garnering more positive coverage.
Figures from Glenigan, the Office for Budget Responsibility (OBR) and S&P Global UK Construction PMI reveal reasons for cautious optimism.
The most recent Glenigan Construction Index showed residential starts rising 24% quarter on quarter and up 22% year on year, a clear indication of improved confidence. The PMI stats pointed to housebuilding as providing the upside to otherwise sluggish construction figures.
Even if volumes reach such a high, this will fall short of what the country needs to address the housing crisis
The OBR has even made predictions of UK housebuilding reaching a 40-year high by 2029/30.
Before we start hanging out the bunting, however, context is everything. It could be reasonably argued that the UK has had a woeful housebuilding record over the past four decades, so a ‘record high’ starts from an extremely low bar.
This is a point on which Hampshire Trust Bank managing director of development finance Neil Leitch is keen to expand.
“Optimism around a resurgence in housebuilding is understandable but has to be kept in perspective,” says Leitch.
“Predictions of record delivery by the end of the decade are encouraging, yet those records are being measured against decades of underperformance. Even if volumes reach a 40-year high, it will fall short of what the country needs to address the housing crisis.”
Shawbrook managing director of development finance Terry Woodley agrees there is room for optimism.
Many developers would be happy to pay increased fees if it made the process quicker
“Areas such as residential construction have struggled to grow due to a lack of demand, likely due to wider economic concerns that have dampened confidence across the board.
“Still, the government’s efforts over the past few months to ‘Get Britain building’ have been notable and could help instil confidence in the coming months.
“This includes reforming the planning system, boosting training to address the skills shortage and pledging £113bn of capital spending over the next five years, which have all contributed to the OBR’s predictions that housebuilding will reach a 40-year high.”
Clive Docwra, managing director of property consultant McBains, accepts that government commitment to building more homes shows willing but points out that similar targets have been set before and not been achieved.
“The OBR forecast should give us cause for optimism, but a lot of cards will still need to fall into place for those sorts of numbers to be achieved,” he says.
A faster planning process means very little if there is no one available to manage it properly
“In particular, changing the planning system culture will be critical. In the year ending June 2024, planning approvals were at their lowest number since records began in 1979, with just 31,600 residential applications granted — down 8% on the previous year.”
Leitch concurs with this view.
“Planning remains the most immediate challenge. Developers continue to face delays that stretch into months, even on straightforward applications. For SME developers, that sort of uncertainty can make or break a project. They need clarity and responsiveness to keep sites moving and teams working.”
Leitch argues that the Planning and Infrastructure Bill has the potential to improve things, particularly through digitisation and reduced bureaucracy. However, without real investment in staffing, training and consistency, those reforms are unlikely to achieve their full impact.
“Most planning departments are already under-resourced,” he says.
“A faster process means very little if there is no one available to manage it properly.”
Docwra agrees that chronic under-funding of public-sector planning has left services understaffed and overworked. However, he suggests possible solutions to the issue of underfunded planning departments.
The government’s efforts to ‘Get Britain building’ have been notable and could help instil confidence in the coming months
“We could allow local planning authorities to raise planning fees in line with inflation to cover the cost of planning applications, and ringfence these funds so they are spent only on planning. Many developers would be happy to pay increased fees if it made the process quicker.”
Docwra also highlights the fact that planning officers’ working days are often tied up with applications for minor house improvements, leaving them less capacity to focus on larger applications.
“To solve this, Labour could outsource parts of the planning process. This wouldn’t be an entirely new concept: the approved inspector role under buildings regulations was privatised, so the same could happen for the planning process.”
Even if planning issues are tackled, however, other factors may act as brakes on housebuilding volumes — notably, developer commitment and skill availability.
As MS went to press, the government announced that training for bricklayers and carpenters would play a key part in 120,000 new apprenticeships, funded as part of Labour’s £3bn budget to “rebuild Britain”.
Optimism around a resurgence in housebuilding is understandable but has to be kept in perspective
It also confirmed proposals to streamline planning rules for SME housebuilders, but also warned developers they could be stripped of land or fined if they failed to deliver homes to a defined timeframe.
There is some fresh thinking but, to hit ambitious new housing targets, all elements must be aligned. Developers need to be encouraged not to hold onto land; the planning system should not frustrate developers by moving at a snail’s pace; and projects, once given the green light, should not be slowed by a shortage of skills.
That is a lot of moving parts. Over the next few years we will see whether they run in sync.
A week after this article was written the Chancellor announced a £39bn injection of cash over 10 years into UK housebuilding. Also in the Spending Review was new money to support training and upskilling. Will the £39bn prove a gamechanger?
Prime Minister is certainly of this mind – he said the investment would be “transformational” however not everyone in the industry is convinced.
As Access FS mortgage sales and marketing director Nick Jones points out: “It’s tempting to focus on the big-ticket announcements around housing – and there was certainly some good stuff in there on Homes England and social housing. But while everyone’s dazzled by the sexy stuff, Angela Rayner’s been very publicly battling to protect day-to-day funding settlement for her department, the Ministry for Housing, Communities and Local Government (MHCLG). She has been right to.”
He added: “While that funding is not in the spotlight, cuts there could have a major knock-on effect for levels of resourcing in local government planning support. So, while it might not grab the headlines, I’m worried reductions in local government budgets could hobble planning functions. Planning delays and under-resourced local authorities have been holding back the UK’s property market for too long – and this could make the situation worse.”
This article featured in the June 2025 edition of Mortgage Strategy.
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