It’s anticipated that the number of new build completions could reach an all-time low as we continue into 2024. Here, the experts at Shortland Horne look at the reasons behind the fall.
Mortgage rates and the cost of living
Ongoing issues surrounding high mortgage rates and the cost of living continue to have a huge impact on the new build market.
Lower mortgage rates make it more attractive for individuals to buy new homes, which can drive up demand for them. However, higher mortgage rates may deter potential buyers from making a purchase, which slows down demand for new construction. At the moment, we’re living in the latter – and although mortgage rates are expected to drop, they’re still at around 5.5 per cent – which means people are reluctant to part with their cash for a new build.
It’s also worth noting that new builds are often marketed at premium prices, in comparison to existing houses. And with those seeking a new home already influenced by mortgage rates, paying sky-high prices for a new build isn’t necessarily the most attractive option.
Construction costs
What’s also come with the cost of living crisis is a rise in construction costs, including labour and materials.
Since November 2020, we’ve seen a 35 per cent increase in the price of all types of building materials. And, although prices are starting to drop slightly, developers are feeling the impact of these sky-high prices.
This can increase the overall cost of building new homes, potentially leading to higher prices for buyers – at an already financially difficult time – or a reduced profit margin for construction companies and developers.
Reductions in planning consent
It’s reported that the tail end of 2023 saw a drop in the number of new residential property schemes granting planning content, which is already having a knock on effect on 2024’s competitions.
According to figures from the Home Builders Federation, project approvals were down by a staggering 18% when comparing the first nine months of 2023 with the previous.
Developers consciously slowing down the build process
With developers conscious of the current cost of living, high mortgage rates and expensive construction prices, we’re finding that they’re slowing down the building process in some cases. By slowing down the building process and delaying completion, they hope they’ll protect house prices and profit margins.
What this also means is we’re seeing developers building to demand – rather than building multi-house estates and then having to sell properties at a discounted price due to lack of demand.
Fewer sold in 2023 is delaying 2024 completions
It’s no secret that the entire property market took a hit last year – and new builds were no exception. And with fewer new homes sold in 2023, developers are having to sit tight before they start building and completing new builds in 2024.
A reluctancy from developers to buy land
Developers are becoming reluctant to buy land – especially when that land could result in them actually losing money. As well as shedding out on large plots, they’ll also be faced with today’s expensive material and labour rates – which means, they might risk actually losing money by the time the new build is complete.
Are you looking to move home in the Midlands?
If you’re thinking about moving house, then we would always advise contacting a team of property experts who can advise you on the current market and guide you depending on your individual circumstances.
If you’re looking to buy in Coventry or the surrounding area, then get in touch with Shortland Horne. With years of extensive local knowledge of selling and renting houses, we are here to find you your perfect property. Contact us today.