The UK housebuilding sector is poised for a period of growth, influenced by various economic factors and industry developments. Key projections and trends include:
Increased housing starts
Private housing initiatives: After an 11% decline in private housing starts in 2024, forecasts indicate a 2% increase in 2025, with a cumulative 14% rise anticipated by 2026. This resurgence is attributed to improved economic conditions and supportive government policies according to Glenigan.
Overall construction output: The Construction Products Association projects a 2.5% rise in total construction output for 2025, following a 2.9% decline in 2024. This rebound is expected to continue with a 3.8% increase in 2026, signalling a positive trajectory for the construction industry.
House Price Growth
National trends: Analysts predict a 2.5% increase in UK house prices for 2025, revising earlier forecasts that anticipated a 3% decline. This adjustment reflects decreasing mortgage costs and sustained demand in the housing market.
Five-year outlook: Projections suggest a 19.9% national house price growth from 2025 to 2029, with London expected to see a 21.6% increase. This growth is underpinned by a limited supply of new homes entering the market.
Industry consolidation
Major mergers: The merger between Barratt Developments and Redrow in October 2024 has created Barratt Redrow plc, a leading entity in the UK housebuilding sector. The company plans to construct approximately 22,000 homes annually, aiming to capitalise on economies of scale and increased market share.
Market Dynamics
Demand recovery: Following interest rate cuts by the Bank of England in late 2024, there has been a resurgence in demand for new homes. However, concerns about affordability persist, especially with expectations of limited further rate reductions in 2025 according to Reuters.
Policy impacts: Government initiatives, including planning reforms and mandatory housing targets, are anticipated to boost the housing supply. Additionally, changes to stamp duty thresholds effective April 2025 may influence buyer behaviour, potentially leading to increased market activity in the first quarter.
Challenges
Affordability concerns: Despite positive growth indicators, affordability remains a significant issue. Elevated mortgage rates and cost-of-living pressures could temper demand, particularly among first-time buyers.
Regulatory scrutiny: The Competition and Markets Authority’s ongoing investigations into anti-competitive practices within the housebuilding industry may lead to increased regulatory oversight, potentially affecting operational practices.
In summary, the UK housebuilding sector in 2025 is expected to experience growth in housing starts and property values, driven by economic improvements and industry consolidation. However, challenges related to affordability and regulatory scrutiny may influence the pace and sustainability of this growth. The building products supply chain must prepare in readiness to support this growth, with measures in place to support the continuation and acceleration of environmental protection.
