Housing output to slump 35% this year

Housebuilding volumes could drop by around 35% this year, according to a forecast by planning consultant Barton Willmore.

The firm, which modelled the impact on current housebuilding output if the coronavirus provokes an equally severe recession to that experienced after the 2008 global financial crisis, predicted that the number of homes completed could fall to 160,000 this year from in excess of 240,000 in 2019/20.

Using the response of the housebuilding industry following the 2008 crisis as a guide to recovery this time, Barton Willmore said it was possible the volume of homes built will not start to recover for another five or six years, with output as low as 150,000 by 2024/25.

Following the 2008 recession, housing completions were still around 45% below their pre-crash levels in 2012/13, five years after the pre-crash high of 2007/8.

Barton Willmore joint senior partner Mark Sitch said the data pointed to the need for a significant planning policy intervention by the govrenment, including a re-emphasising of the “presumption in favour” of development and more funding for planning departments. He said: “Even if temporary, supporting measures are needed by government to respond to this, to deliver the housing and economic growth needed across the country.”

A commitment to build one million homes in the next five years was contained in the 2019 Conservative Party manifesto, alongside a pledge to increase housebuilding rates to 300,000 by the middle of the next decade. Barton Willmore’s analysis suggests that output could be half that at the time of the next election, which it said would make it a “major political problem as well as a significant housing challenge”.

The analysis comes after Bank of England Monetary Policy Committee member Jan Vlieghe yesterday said that the UK was “experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries.”

European Central Bank chief Christine Lagarde also said yesterday that she expected EU GDP to fall by 9% this year in the wake of the coronavirus crisis, twice as bad as the fall following the global financial crisis.

Bartlett Real Estate chair Yolande Barnes said on Housing Today earlier this month that housing market sales will drop by anything between 30-50% in 2020 on last year. Supporting Barton Willmore’s analysis, Barnes said that economic forecasters were moving towards predicting a more prolonged “U-shaped” recession rather than a short sharp shock and quick recovery.

Last week Housing Today published analysis suggesting that around three quarters of housebuilding sites are on hold, which implies a minimum drop in output of 6% for every month that lockdown measures continue.

Christopher Young, planning QC at No.5 Chambers said it was now “obvious” that impact of covid-19 would be more than a “blip”, and that the government “plainly” needed to act to extend its Help to Buy policy to support the housing market. He said: “There are going to be some very serious implications for housebuilding and addressing housing need. We were already in a terrible housing crisis before Covid 19 struck. And now it is only going to get worse. Major initiatives from the Government are required in response.”

The housebuilding industry is understood to be in conversation with ministers regarding potential measures, including a Help to Buy extension, which will support residential developers.