The Intermediary – October 2026 - Flipbook - Page 64
SPECIALIST FINANCE
Opinion
The market
needs action,
not more targets
T
he UK’s housebuilding
sector is caught in
a difficult position.
The Government
wants developers to
build more homes,
faster, but the market conditions
facing those developers are making
that increasingly difficult. Demand
remains fragile, borrowing costs are
puing pressure on affordability, and
the cost and complexity of bringing
new developments forward continue
to weigh on viability.
This creates a fundamental problem
for the Government’s ambition to
deliver 1.5 million new homes by
2029. Seing a target is one thing;
creating the conditions in which
housebuilders have the confidence and
capacity to deliver it is another. At the
moment, there is still a significant gap
between the two.
The latest S&P Global UK
Construction PMI underlines just
how challenging the environment
remains. While the overall
construction PMI improved from
44.3 in August to 46.1 in September,
signalling the slowest rate of
contraction since January, housing
remained by some distance the
weakest-performing part of the sector,
with an activity reading of just 40.7.
There are some signs of
stabilisation, but it would be
premature to see this as a recovery
in housebuilding. New orders
fell at their fastest pace for
three months,
business
confidence weakened and firms
continue to point to high borrowing
costs and difficult market conditions.
For the Government, this presents
a difficult balancing act. It has made
increasing housing supply a central
part of its agenda, but the industry
it needs to deliver that ambition
is facing a combination of weak
demand, affordability pressures
and uncertainty.
Planning reform is clearly an
important part of the answer. The
Government has made progress in
seing out its ambitions, but the
experience of previous initiatives
shows that announcing new homes
is considerably easier than geing
them built.
The Garden Villages programme is a
good example. Launched in 2017 with
the ambition of delivering around
a million homes over the following
decade, many of the projects have
faced lengthy planning processes and
other obstacles before construction
can begin. It is a reminder that even
where there is political commitment
and land identified for development,
delivery can
take years.
That is particularly important when
considering the 1.5 million target. The
Government cannot rely on planning
reform alone to suddenly unlock
supply. Housebuilders also need
confidence that they can build homes
that people can afford to buy, while
smaller developers need the financial
capacity to take projects forward.
This is where the Budget could
play an important role. There will
inevitably be pressure for measures
that stimulate demand, particularly
if the Government is concerned about
affordability and transaction levels.
Its recent announcement of the Your
First Home scheme is a good example.
The proposed 20% Governmentbacked equity loan, allowing eligible
first-time buyers to purchase a newbuild property with a 2.5% deposit, is
clearly designed to tackle the deposit
barrier while also giving the newbuild market a much-needed boost.
That kind of support has a role
to play, particularly in a market
where affordability and access
to finance
