The new build market has experienced record levels of demand over the last year, according to a new report by Savills, which also found that regional new homes reservations were up 23% in the first half of 2021 compared to the first half of 2019 (a more normal year than 2020).
Similar to the wider housing market, demand has been fuelled by those re-prioritising what they want from a home after lockdown, with an additional boost from the stamp duty holiday. The ‘race for space’ has particularly benefitted markets outside of London.
So how will demand shift now the full (SDLT) holiday has ended? It’s likely some of the heat in the market will cool, but with regional new homes reservations in June still 5% higher than the monthly average between 2018 and 2019, it’s unlikely to be a dramatic drop-off, says Savills.
Nevertheless, even with demand remaining high, that’s not to say there aren’t still challenges in the new build market that developers will need to consider.
Against the backdrop of strong demand for new homes, there are a number of headwinds that will continue to challenge developers both looking for new sites as well as completing existing ones.
The report states: ‘One well reported challenge continues to be material and labour shortages. Almost 60% of respondents to HBF’s survey considered material availability
a major constraint, the highest rated factor alongside planning delays. And costs are likely to increase going forward with Arcadis forecasting tender price inflation for regional building construction at 16% by 2025, though house price growth is forecast to outweigh this.