Despite wider macro-economic and political uncertainty, largely due to issues concerning the UK’s departure from the EU at the end of 2020, overall the residential newbuild market remained stable during 2019.
However, the impact of Covid-19 and the Spring lockdown is forecast to lead to at least a 30% decline in contractor’s output in 2020 and over 40,000+ fewer private homes being built. At the peak of the first wave of Covid-19 in the UK, around 2,600 private residential building projects with an aggregate value of £40bn were shut down.
Currently, forecasting for the medium term is particularly challenging. Not only is it unknown how long the Covid-19 pandemic will continue but, in 2021, uncertainties will be compounded by the impact of the UK finally leaving the EU. Assumptions for 2021 have been based on anticipating the pandemic persisting well into the year.
Therefore for 2021, we expect ongoing difficulties in the private housebuilding sector to persist. The level of mortgage applications and approvals may well be lower than in 2019 due to lower levels of confidence in the market among potential homebuyers and lenders. Lenders may also impose tighter restrictions on borrowing and unemployment levels will probably rise substantially, once furlough schemes end and more businesses go into liquidation. We would therefore expect demand for new homes to be impacted although offsetting this will be the continuance of Help to Buy and other financial assistance schemes.