New Build Market in 2024 - a mortgage industry perspective

A new analysis of the new build housing market for next year suggests that eventually there will be a bounce, triggered by more mortgage rate falls.

The Mortgage Advice Bureau says that the latest data from the Department of Levelling Up, Housing and Communities - for the period between April and June this year - shows that only 8,000 residential projects received planning consent across the UK. 

Of that 8,000, only 900 major residential decisions were granted. This marks an 11 per cent decline compared to the same period last year, reaching the lowest level in over a decade. Minor residential permissions have also seen an eight per cent decrease. These statistics were corroborated by independent research conducted for the Home Builders Federation. 

At the same time, transaction figures have dropped around 20 per cent from the long-term average, while prices have at best flatlined and in some cases fallen.

Mobeen Akram, new homes director at the Mortgage Advice Bureau, says: “While we cannot deny that the market is challenging, it’s positive that we are seeing mortgage rates - and subsequently, house prices - stabilising. Even in the new build industry, we’ve seen a 3.9 per cent decrease in house prices, which may encourage more homebuyers for 2024. The UK housing market continues to stay afloat and stable market performance is always a good thing, and this consistency indicates that it will continue to stand its ground as the year draws to a close.”

But he says it's important to recognise that these figures provide only a surface-level view, and the housing market's intricacies become apparent when analysis delves into specific locations, cash buyer dynamics, and market segments.

Looking ahead to Q4, MAB says it can anticipate further rate reductions, assuming the Bank of England’s base rate remains unchanged. 

With the two-year swap rate now lower than the base rate, it seems likely that rates will gradually decline, offering even more favourable financing options for homebuyers. Moreover, Akram suggests we can look forward to some long-awaited lender innovation in mortgage products tailored to buyers of new homes, with promises of more flexible and attractive options on the horizon.

For MAB New Homes, Shared Ownership has seen an impressive year-on-year increase of around 10 per cent. “As steady sales continue, it will be interesting to see if the industry as a whole receives more government support in this area, especially considering ongoing concerns surrounding affordability in the market” explains Akram.

Finally, as we approach the next general election in January 2025 at the latest, both major political parties have expressed a five-year aim to reach 70 per cent home ownership. This can only be met if the government also strives to better the lack of housing supply.

Prime Minister Rishi Sunak has hinted at a Help To Buy 2 initiative, which could further boost the housing market and provide vital support for aspiring homeowners.

Akram concludes: “As the year-end for 2023 approaches and with rate reductions on the horizon, we can remain cautiously optimistic about the future of the housing market. With falling mortgage rates, the potential for more sales and government initiatives, and a commitment to increasing homeownership, there are plenty of reasons to be positive about the road ahead.”