Northern resilience: housebuilders rise to the challenge
Despite ongoing scrutiny over housing delivery, 252,500 new homes were completed in England in 2022, according to Savills’ analysis of EPC data – the second-highest figure since the global financial crisis, writes Peter Marsden of Shoosmiths.
These new homes were delivered during a period of economic and political turmoil, with the impact of Covid-19 lingering and build cost inflation peaking at 15.3% in Q2 2022, as measured by the BCIS Private Housing Construction Cost Index.
The majority of housing completions in England remain from traditional housebuilders. These businesses form the foundation of the residential sector and the backbone that is driving housing delivery.
2023 is, however, increasingly testing the strength of housebuilders, no matter their size.
Research from Savills shows a slowdown in the number of housing completions in England, down 20% between Q4 2022 and Q1 2023. Interest rates remain well above target levels and when combined with high inflation, pressure is being placed on the residential market. This is impacting lending and the ability to purchase a new home.
Housebuilders operating in the North of England are not immune to these challenges. They too are dealing with various economic and operational hurdles, while having to adapt to legislative changes, including new biodiversity net gain requirements in England – set to be enforced in November 2023 as part of the Environment Act 2021.
The latest data does reveal some points for optimism, with Zoopla’s May 2023 House Price Index analysing the national landscape, including the North of England’s residential market.
The index highlights the North East as having some of the highest levels of buyer demand in Great Britain, with more agreed sales than the national average. Sales agreed in the North West, Yorkshire and Humber regions are also up on the five-year average in the four weeks to 21 May.
When considering what the rest of 2023 and 2024 might hold for housebuilders in the North, it is crucial to review not only the market data, but also the businesses themselves.
I’m lucky enough to have worked as an in-house lawyer at PLC housebuilder, Taylor Wimpey, and Harrow Estates – part of Redrow.
These experiences demonstrated how adaptable and resilient housebuilders are when faced with obstacles, whether economic or political. They also reaffirmed how talented their teams are, from apprentices to graduates through to board level.
It is this talent and drive that is key to housebuilders being able to overcome the challenges that will no doubt continue to arise over coming months. All while still tapping into emerging opportunities, such as working in partnership with local authorities or even collaborating with other developers and funders in new areas of the market, such as build-to-rent.
By way of example, Sigma Capital announced plans in February to deliver 865 new single-family homes in partnership with housebuilder Countryside Partnerships. The homes will be developed across 11 sites – representing an investment of over £205m and also showing how housebuilders are embracing a range of mixed tenure models.
Joining Shoosmiths real estate as a partner in its national living sector team will give me the opportunity to further assist housebuilders in the North and nationally, helping them navigate the market and legislation as it evolves.
Housebuilder teams are resilient and will continue to rise to the challenge, delivering vital new for-sale homes, while diversifying their development activity to ensure long-term viability.
- Peter Marsden is a real estate partner at Shoosmiths