The UK housing market bounce-back continues as June’s sales activity pips 2019’s levels. Savills has now released the latest research on how things are progressing across the sector.
During the first and second week of June, house sales agreed were up 6% and 17% respectively on 2019, according to analysis by TwentyCi. This rebound is apparent across both the new-build and the existing homes market, showing a return to growth for buyer appetite and demand.
The new-build market, according to Savills, suffered less during lockdown than second-hand homes. This is because the nature of new-build properties means virtual viewings and online reservations are already commonplace in this field. Therefore, despite social distancing, buyers interested in off-plan properties were – and still are – able to conduct much of the process remotely.
Uplift in demand
Pent-up demand has certainly kick-started the market, though. This is according to Savills’ latest research paper, ‘Coronavirus and residential development‘. Some housebuilders have seen higher fall-through rates due to market uncertainty, but many are positively reporting pre-COVID cancellation rates.
The report points out that new-build sales “have increased towards 2019 levels on a per outlet per week basis”.
It adds: “Sales values appear to be holding up relatively well so far. Whilst some sellers are offering incentives including stamp duty paid and furnishing packages, others are not seeing significant need for them.”
“Sales rates going forward will depend on whether buyer confidence is maintained during the summer and into the autumn, as economic conditions become clearer.”
Productivity in the construction sector
In England, around 85% of construction sites are currently open and running. Of those still to reopen, says the report, sites have a capacity to build around 47,000 homes. As workers on sites continue to adapt to social distancing measures, the number of sites able to open is likely to increase.
Build UK’s recent survey shows that some large housebuilders are seeing 80% output across their sites. Across all sites, around 78% of normal output is being achieved. While there is still some way to go, these statistics are extremely promising after a quiet few months.
Savills believes overall construction capacity is now at around 65% in England, which is a “vast improvement”. However, much of the focus has been on completing existing sites, meaning that new starts are lagging behind.
Back in April, there were 5,000 new home starts across the UK, according to the NHBC. This was just 5% of the figure in 2019, while in May it was 10% of last year’s numbers.
The report adds: “In the four weeks to w/c 14th June, starts on new sites reached 12% of pre-Covid levels. Housebuilders will need confidence in the sales market for the number of sites started to increase.”
Predictions for the future
Another promising side to the recent uplift involves planning permission. The Savills report shows that planning consent has remained relatively robust throughout the last few months. In the months since mid-April, around 290 new sites have gained planning permission each month. This is only around a quarter (26%) lower than pre-COVID levels.
The report adds: “The 1,200 sites (61,000 homes) with planning consents due to expire before the end of the year (with expiry dates from the start of lockdown), have been given an extension to 1st April 2021 according to Glenigan.”
“This will give extra time for sites that couldn’t be started due to the lockdown to commence. The extension for these consents will support the recovery in sites started over the coming year.”
Savills’ overall predictions are based on a series of possible scenarios. It believes housebuilding in 2020/21 will reach 66% compared to the previous year (around 171, 000 new homes). If the economy bounces back, housing supply could reach 2019/20 levels by 2022/23.
Likewise, if medical advances this year prove successful, the picture will be much brighter. Savills expects completions would fall by 31% this year but recover to normal levels by 2021/22. If UK economic recovery takes longer, so will the recovery of the construction sector.
