UK Housing Market Outlook to 2028

UK Housing Market Overview

• The UK housing market was valued at USD 315 Bn in 2023. This growth is driven by low-interest rates, increasing population, and significant demand for housing in urban areas.
• The UK housing market is dominated by several key players, including Barratt Developments, Taylor Wimpey, Persimmon Homes, Berkeley Group, and Bellway. These companies have established strong market positions through extensive land banks, strategic developments, and a focus on quality construction.
• A significant development in the UK housing market was the introduction of the government's First Homes scheme in June 2021. This initiative aims to provide homes to first-time buyers at a discount of at least 30% compared to the market price. In 2023, over 5,000 homes were sold under this scheme, demonstrating its impact on making housing more affordable for young buyers and key workers.

UK Housing Current Market Analysis

• UK government launched the "Green Homes Grant" scheme in 2023 to improve energy efficiency in homes. This initiative provides homeowners with up to £5,000 to cover energy-efficient improvements. By the end of 2023, over 60,000 households had benefited from this grant, contributing to the market's push towards sustainable and energy-efficient housing.
• One of the challenges faced by the UK housing market is the rising cost of construction materials. In 2023, the prices of key materials such as timber and steel increased by over 20%, putting pressure on developers and affecting project timelines and budgets. This cost inflation has led to higher property prices, impacting affordability for potential buyers.
• London continues to dominate the UK housing market in 2023. The city's robust economic environment, high population density, and significant demand for both residential and commercial properties make it a focal point for real estate activities.

Market Segmentation

The UK Housing Market can be segmented based on several factors:

By Property Type: In the UK housing market segmentation by property type is divided into detached houses, semi-detached, terraced houses and flats. In 2023, Detached houses dominate the housing market due to their provision of more space and privacy, highly valued by families and higher-income groups. These homes offer larger plots of land, reducing noise and enhancing seclusion, making them ideal for modern family needs and preferences.

By Buyer Type: In the UK housing market segmentation by buyer type is divided into first-time buyers, investors, home movers and overseas buyers. In 2023, First-time buyers represent a crucial segment in the housing market, fueled by substantial government incentives and attractive mortgage rates. These factors create a supportive environment, encouraging many to take their initial step into homeownership.

By Region: In the 2023, UK housing market segmentation by region is divided into north, south, east and west.  In 2023, the South region, including London and surrounding areas, dominated the market. The high demand for residential properties, significant economic activities, and extensive infrastructure development contribute to the South's leading position in the market.

UK Housing Market Competitive Landscape

• Barratt Developments' Increased Completions: In 2023, Barratt Developments reported a notable increase in housing completions, with over 17,000 homes built. This achievement underscored the company’s commitment to addressing the housing shortage and meeting market demand. Barratt’s strategic land acquisitions and efficient construction processes contributed to this success.
• Taylor Wimpey’s Modular Housing Partnership: In 2023, Taylor Wimpey announced a significant partnership with a modular housing manufacturer. This collaboration aims to enhance the efficiency of home construction, reducing build times by 30%. The partnership reflects the industry's shift towards innovative building methods to meet housing demands more effectively.

• Persimmon Homes’ Sustainability Initiatives: In 2023, Persimmon Homes launched a new range of energy-efficient homes, incorporating advanced insulation and renewable energy solutions. These homes are designed to reduce energy consumption by up to £1,000 annually, aligning with the growing demand for sustainable living options. Persimmon’s focus on sustainability enhances its market position.

UK Housing Industry Analysis

UK Housing Market Growth Drivers:

• Increased Mortgage Approvals: In 2024, the UK saw a substantial rise in mortgage approvals, with over 1.2 Mn mortgages approved in the first quarter alone. This surge is driven by favorable interest rates and government incentives, making homeownership more accessible to a larger population. Data from the Bank of England indicates that the average mortgage amount approved in 2024 was USD 281,600, reflecting a strong demand for housing finance.
• Government Incentives for First-Time Buyers: Government schemes such as the Help to Buy Equity Loan continue to bolster the housing market. In 2024, more than 60,000 first-time buyers utilized this scheme, with an average loan amount of USD 104,000. This initiative has significantly reduced the financial barriers for young buyers, driving demand in the housing sector.
• Population Growth and Household Formation: The UK’s population growth is a key driver of housing demand. This growth, coupled with an increase in household formations—anticipated to add 200,000 new households annually—fuels the demand for new housing developments. The increase in household formation is driven by various factors, including demographic changes and societal trends towards smaller household sizes.

UK Housing Market Challenges:

• Shortage of Skilled Labor: In 2024, the Construction Industry Training Board (CITB) reported a deficit of 100,000 skilled workers, including carpenters, electricians, and bricklayers. This shortage has led to project delays and increased labor costs, which in turn affects the overall supply of new homes in the market.
• Planning and Regulatory Hurdles: The complexity and length of the planning permission process continue to hinder new housing developments. In 2024, the average time to secure planning permission extended to 12 months, compared to 9 months in 2023. Data from the Local Government Association (LGA) highlights that over 50,000 housing projects were delayed due to regulatory bottlenecks.
• Affordability Issues: Despite various government incentives, housing affordability remains a pressing issue. In 2024, the average house price in the UK reached USD 390,000, up from USD 364,000 in 2023, making it increasingly difficult for many to enter the housing market. The National Housing Federation reported that an average household needs an income of USD 91,000 to afford a mortgage, whereas the median household income is around USD 40,300, highlighting a significant affordability gap.

UK Housing Market Government Initiatives:

• Affordable Housing Program: The UK government’s Affordable Housing Program, which aims to deliver 180,000 new affordable homes by 2026, saw significant progress in 2024. The Ministry of Housing reported that 45,000 affordable homes were built in the first half of the year, providing much-needed relief for low to middle-income families.
• Stamp Duty Holiday Extension: In response to the housing market's recovery post-pandemic, the government extended the stamp duty holiday in 2024, which resulted in a surge of housing transactions. According to HM Revenue & Customs, over 300,000 additional transactions were recorded in the first quarter of 2024 compared to the same period in 2023, with an estimated tax saving of £1 billion for homebuyers.
• National Home Building Fund: The National Home Building Fund, launched in 2024 with an initial investment of £7 billion, aims to accelerate the construction of new homes. The fund supports large-scale housing projects and infrastructure improvements, with an emphasis on sustainable and energy-efficient developments. By the end of 2024, it is expected to facilitate the construction of 100,000 new homes, according to the Housing Ministry.

UK Housing Future Market Outlook

The UK Housing Market is expected to show significant growth driven by government initiatives like Help to Buy, infrastructure investments, and increasing demand.

Future Market Trends

• • Expansion of Build-to-Rent Sector: The build-to-rent (BTR) sector has also seen significant expansion in 2024, with over 70,000 BTR units under construction, up from 55,000 in 2023. This sector caters to the growing demand for rental properties, particularly among young professionals and families. Future growth in the BTR sector is expected to be driven by urbanization trends, demographic shifts towards renting, and increased investment from institutional investors seeking stable, long-term returns.
  • Technological Advancements in Construction: According to the UK Modular Construction Group, over 10,000 homes were built using modular techniques in the first half of 2024, reducing construction time by 30% and costs by 15%. The future growth of the construction industry will likely be fueled by these technological innovations, which offer enhanced efficiency, sustainability, and scalability, addressing housing shortages more effectively.