26 March 2025
If you are covering the OBR’s forecast that planning reforms will see 1.3m homes being added to the UK’s housing stock, please find below a comment from Oli Creasey, head of property research at Quilter Cheviot:
“Rachel Reeves’ Spring Statement this afternoon touted the positive impact, as noted by the Office for Budget Responsibility, changes to planning policy are expected to have on housebuilding figures. Having set themselves an ambitious target of 1.5m new homes over the next five years, the OBR indicates that the Government could oversee 1.3m new homes, which would bring them closer to that target than most commentators thought possible. Should this figure be achieved, it would likely be celebrated, despite falling some way short of the target; successive Governments have set less ambitious building targets and fallen far shorter.
“However, what isn’t clear in the OBR forecasts is how affordability impacts the figures. At present there is great demand for homes across the UK, but lack of supply combines with difficult affordability metrics. Recent ONS figures show that while house prices as a multiple of earnings are now back to pre-pandemic levels, other data providers show mortgage payments as a percentage of take-home pay remain over one third higher than in 2019. Planning offices around the country may now have the capacity (and indeed, obligation) to approve more building schemes, but that may prove to be moot if the marginal buyer cannot secure a mortgage to purchase the finished product. It is notable that shares in UK housebuilders are unmoved by the Spring Statement, with the sector trading down on the back of poor FY results released by Vistry this morning. Analysts are not yet upgrading their volume forecasts, knowing that buyer affordability remains the key metric that now matters to supply.
“We assume that the OBR figures include some assessment of house buyer appetite, presumably based on mortgage interest rate forecasts. If so, there may even be upside to the current forecasts, if the Government is willing/able to address affordability as well as supply – such as if interest rates were to fall faster than expected, or a return to new buyer assistance such as the previous Help to Buy scheme. The Help to Buy scheme was controversial given how much profit ended up being paid out to shareholders and housebuilding executives, but it is undeniable that the scheme increased building rates – we estimate that housebuilding rates were nearly 25% higher in the five years after its launch compared to the five years before. Whether the current Government can or will stimulate demand remains to be seen, but the act of achieving the goal of 300,000 new homes a year over the course of this parliament (a figure last achieved in the 1970s) is seemingly within reach.”
