“We’ll get through it, we’re not worried.”
This was the overriding feeling in the room at North West Business Insider’s Housing Breakfast, held on 15th November 2022.
It brought together some of the leading thinkers in the world of housing (in Manchester) and we all definitely learned a thing or two.
The economy
We’re being treated to a lot of spoilers in relation to Thursday’s Autumn Statement, which means there won’t be a lot that’s a surprise by lunchtime. This has allowed the experts at Savills to predict that interest rates will begin to decline towards the end of 2024/beginning of 2025. The downturn will be softer than first thought, but could be longer too.
What this means for the coming year (2023) is a predicted 10% reduction in house prices across the UK, with around 8% in the north west. Although this sounds bad, in reality it takes us back to where we were in Q4 2021, a mere 12 months ago.
The effect on housing
Of course, higher mortgage rates will cut sales volume. It’s predicted that just 870,000 homes will be sold next year (certainly not as bad as in 2008/9), but from 2024 it will uplift to around 1 million sales per year.
The main issues when building homes
Sales aren’t the only issue that housebuilders are facing. Massive issues with the planning process means that a wider discussion on what can be done was requested by several people in the room. So, what are the issues?
- Overworked and under resourced local authorities: paperwork takes time to process
- Emboldened objectors – social media has helped local communities to get together and start awareness campaigns against certain developments, influencing planning
- Changes to the secretary of state mean upheaval – and even a throwaway comment by the PM can change everything for planners!
- The term ‘greenbelt’ – not all greenbelt land is idyllic, sweeping fields but the fact it’s called greenbelt is emotive. Perhaps another term could be better? This is a big election issue so it’s unlikely to change any time soon
- Lack of brownfield sites in desirable areas: people don’t want to live on these
- Cost to make brownfield sites fit for purpose (depending on what they’ve been used for in the past)
…oh, and did we mention new environmental targets?
- New legal requirements to reduce the impact of developments, from air management plans to road infrastructure and waste management plans – and more. These will need to be scrutinised by the planners, taking into account other proposals on the table. Developers are awaiting more information on this front
However as one speaker smiled, the harder the planning process is, the more some housebuilders give up, which opens up opportunities for companies like his own (which don’t give up). As always in life, where there are some losers, there are some winners.
The rental market in 2023
There’s no doubt that rents and service changes are increasing in line with all other costs. But will there come a point when they become unaffordable? Some of the speakers expressed concern for young professionals who want to live and work in Manchester city centre. Up against international students, where money is no issue, young professionals are starting to miss out on accommodation. In fact, at one point in the past 12 months there were less than 400 flats on the market to rent, in a city where I personally spotted 14 cranes last week which seem to move around building high rise after high rise. Supply is still not keeping pace with demand.
Social housing
The issues stretch across the board. Steve Gladwin from Onward Housing discussed his sector’s challenges. Having undertaken a major retrofit programme in recent years, it will be building 5,000 new homes by 2030, via different partnerships and funding routes.
However, as most social housing providers rely on rental income to survive, Onward and every other social housing provider (we were with Great Places two weeks ago and the same issue was mentioned…) will be listening eagerly tomorrow to find out what the rent cap will be set to. Different percentages have been bandied around, from 3% – 7%. The upper end allows the housing provider to do more (more money = more homes), but the lower end possibly means a rethink of future plans.
Summary
As one speaker put it: the pace of delivery is slowing due to many challenging market conditions, from the price of materials to planning and mortgage rates. But we’ve been here before and we got through it, no matter what’s announced in Thursday’s Autumn Statement.
Yet I was left at the end of the event with one burning question – I’m not sure whether those in the room had a feeling of positivity, or indifference. Fingers crossed the former. Time will tell.