One of the UK’s largest estate agencies has expressed serious concerns over the viability of the Government’s plan to deliver 1.5 million new homes by 2030, saying Labour has ‘misunderstood the relationship between housebuilding and wider market activity.’

In an unusually direct challenge to Government policy, Savills’ Market Demand Insights: England’s Housing Challenge report, authored by Head of Regional Development, Patrick Eve (pictured), highlights that new housing delivery has averaged just 230,000 homes a year over the last three years – leaving a shortfall of 70,000 homes a year against targets that may be even harder to achieve in the current market conditions.

The report uses data to show how the delivery of new housing is directly linked to overall sales transaction levels, which have fallen by 26% over the last three years. Without addressing affordability barriers and restrictive mortgage regulation, Savills believes building rates cannot substantially increase.

The report reveals that the ratio between the overall number of sales transactions in the English housing market and private housebuilding starts has consistently been 10 to 1 and has only ever been broken when the new build market was supported by Help to Buy.

Absolute surety

And housebuilders, says Savills, are unlikely to expand their delivery rates unless they are absolutely sure there will be market demand for increased numbers of homes.

Private sector housebuilding activity has accounted for 77% of new build starts over the last five years and is therefore fundamental to growing the pipeline. However, sales rates reported by PLC housebuilders in 2024 are 15% below pre-pandemic levels when Help to Buy was boosting volumes.

The analysis also reveals that transaction declines have been most concentrated amongst first-time buyers in London and the South East – precisely the regions with greatest housing need. By contrast, more affordable regions like the Midlands and North have managed to maintain stronger activity levels.

Mortgage restrictions

The report suggests that if mortgage restrictions were to be relaxed, it could unlock transaction volumes and increase capacity for new homes and the Financial Conduct Authority has indicated it may review lending rules, potentially allowing first-time buyers to borrow more and enabling more loans for those with smaller deposits.

Savills sees more cause for optimism in institutional investment, with the UK planning on investing approximately £23 billion into the Living sectors over the next three years. The affordable housing sector, though, faces significant challenges, with delivery in the sector expected to fall to around 40,000 homes annually by 2029 without substantial government intervention through increased grant funding.

While planning reforms, in general, are welcomed by Savills, it says the Government must do more to stimulate demand and current projections suggest England will still face a shortfall of approximately 95,000 homes per year against its 300,000 annual target.