The change of Government in July this year seemed to bring a period of uncertainty in the property and construction sector to an end. With the promise of a new focus on growth, of which construction would play a major part, many in the industry breathed a sigh of relief.
However, more recent Government announcements – including those in the Autumn Budget – have once again dampened the mood and given rise to speculation that growth will be slower than first hoped.
Across the residential, rental and infrastructure sectors, there will be many challenges ahead, as well as many opportunities, so it’s important that firms are fully prepared for these.
Building the homes we need
Back in the summer, the Government set out the first major steps in its plan to build the homes the country needs, with the promise of new mandatory local housing targets over the term of this parliament.
The exact roll-out of these plans is yet to be released, but the aim is that 1.5 million new homes will be built over the next five years – which is good news for developers.
However, as with any large increase in residential new builds, this will have to include a streamlining of the current planning system, to ensure developers can quickly react to local needs without being tied up in costly red tape.
What’s more, for smaller developers, the recent increase in rates of Capital Gains Tax may make it more difficult for them to secure development land, as owners will be reluctant to pay the additional tax on sales. And with the change coming in immediately after the Budget, it gave little chance for developers to take the opportunity to purchase land from owners looking to sell before the changes came into force.
Developers will also remain concerned about costs, as the increase in employer’s National Insurance, as well as the National Living Wage and National Minimum Wage from April, will make it more difficult for them to deliver housing at the right price. These wage increases are particularly stark at a time when the Government has launched a new skills hub initiative to hire thousands more apprentice construction workers – as the wage increase for those aged under 21 is 16%.
However, despite upcoming wage increases, this new Government initiative is a real positive for the sector. It will see the establishment of 32 new Homebuilding Skills Hubs which will deliver fast-track training – making 5,000 more construction apprenticeship places available per year.
In addition to this, the Government has also committed to tackling the biggest drivers of unemployment and inactivity with its Get Britain Working whitepaper. This promises the “biggest employment reforms in a generation” and will certainly help to relieve the construction industry’s concerns about labour supply.
The impact of the Renters’ Rights Bill
The new Renters’ Rights Bill is expected to become law by mid-2025 and its introduction is likely to result in some private landlords looking to exit the rental sector.
In areas where this results in a large number of properties entering the market, this is likely to depress asking prices and lessen the demand for new housing.
However, something that will give house builders greater confidence is the Government’s plans to deliver 5,000 new affordable social homes and the £500m funding from the Affordable Homes Programme. This will give developers more opportunities to work with local authorities and other social housing providers to deliver this target. But as with any opportunity, there will also be a challenge – house builders will need to secure a fair development agreement to allow them to commit the resources needed and be rewarded at the right price.
Uncertainty for infrastructure and large projects
Much reporting of the public spending difficulties has cast doubt on the funding that will be available for major infrastructure projects in 2025.
The Chancellor’s commitment to fund the tunnelling work for HS2 into London Euston is very welcome, but may come at a cost to other smaller scale projects elsewhere in the country. Similarly, the formation of the British Infrastructure Taskforce will hopefully unlock Government and private investment to deliver long-term projects.
Although these measures are unlikely to see the start of significant new infrastructure projects, they may give businesses in the construction sector the confidence to upskill and expand their workforce in 2025, after many years of uncertainty.
Only time will tell how property and construction firms will adapt to these upcoming changes, but being aware of the opportunities and challenges they present will put firms in the best position for success.
Article submitted by Simon Shaw, Head of Property and Construction, Duncan & Toplis
To find out more about Duncan & Toplis, visit www.duncantoplis.co.uk.
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