2025 Predictions for the housebuilding sector
Tim Foreman, Managing Director of Land and New Homes, Leaders Romans Group (LRG):
Uncertainty was the theme of 2024, thanks to the general election, a ‘painful’ Budget and a slower than expected reduction in interest rates.
But from a market point of view, uncertainty resulting in a slow-down has the advantage of creating pent-up demand in the period that follows.
Whereas in 2024 those moving to new homes sales were generally to the ‘need to moves’ rather than the ‘want to moves’, it is the latter who will fuel demand in 2025.
We expect a busy first quarter, largely due to the increase in Stamp Duty which kicks in from April. A first-time buyer whose Stamp Duty cost could rise from £0 to £6,250 in Q2 would be well placed to start house-hunting at the earliest opportunity.
Further drops in interest rates over the course of the year will also provide some relief, though the extent to which the Bank of England reduces the base rate, and the extent to which mortgage lenders follow suite, is unclear.
Looking to the longer term, the publication of the revised NPPF last Thursday heralded some positive changes to the planning system, putting in place plans to realise the government’s ambitious housebuilding targets. With more housebuilding, the market will offer more choice and, with more chance of finding the perfect home, the ‘want to move’ market segment will be more inspired to buy.
But I say long term because I see most of this activity taking place in the latter years of this Parliament: it’s unlikely a site put forward for planning early in 2025 will be home to its first residents until at least 2026.
The ambitious housebuilding programme depends on much more than the planning system: I am concerned about the number of construction workers, trades and craftspeople available to work on the sites of the projected 1.5 million homes.
I’m also concerned that an increase in quantity does not denote a decrease in quality. While the housebuilding industry heaved a collective sigh of relief when ‘beauty’ was removed from the NPPF, design standards must be retained.
It is also important that the SME housebuilder is protected: we need variety, adherence to local styles, flexibility to work on smaller sites and the many other benefits that smaller housebuilders bring. Overdemand for materials risks smaller housebuilders missing out on vital construction products and as such threatens their existence – ironically, when they are needed most. It is encouraging that the October Budget announced plans to double the ENABLE Build scheme to £2 billion so that smaller housebuilders and firms can support the delivery of new homes but support needs to be in place throughout the build progress, not only at the start.
There was some relief among housebuilders on Thursday when the Housing Minister announced plans to adapt the proposed ‘golden rules’ on Green Belt release. The affordable housing requirement of 50% has been replaced with and additional 15% ‘top up’ on the Plan’s currently adopted affordable policy, capped at 50%. This is good news for the schemes which may have been unviable had the flat rate of 50% applied.
On the NPPF, it is both a surprise and a disappointment that paragraph 14, relating to Neighbourhood Plans, remains unchanged. Perhaps one of the few December 2023 changes which has survived the revisions. Many had thought this was an oversight in the consultation and expected to see the December 2023 changes which extended the protection of Neighbourhood Plans to a five year period to be at least reduced back to two years or indeed deleted entirely to support the Government’s housebuilding aspirations.
It is surprising and seemingly inconsistent that the ‘localism’ agenda seems to remain (in paragraph 14) alongside the introduction of top-down housing targets and a wider shift towards strategic planning, which will ultimately see strategic decision making shift towards a new tier of Regional governance. A seemingly missed opportunity to support the delivery of the 1.5 million new homes the Government is targeting.
You May Also Enjoy
Building Trust, One Step at a Time
Investing in Property: A Smart Move for Long-Term Financial Growth
Neighbourly nightmares: One in three Brits face next-door disputes
Breaking Property News 07/08/25
1 in 5 private rented homes could be illegal
