Today’s spring statement shows that housing construction is not only a key board for government growth momentum, but also a major driver between now and next parliament.
The Office of Budget Responsibility predicts that the workforce will build 1.3 million homes over the next five years.
Prime Minister Rachel Reeves said this puts the government “in contact distance” “of its 1.5 million targets” and 50% higher than the one million households built in the past five years.
But this year, the watchdogs have given Reeves little comfort, reducing its growth rate to half to 1% from 2% of October’s budget in 2025.
Inflation is expected to average 3.2% this year, up from 2.6% previously forecast until it drops to 2.1 in 2026.
Watchdogs don’t expect cost of living to be below the Bank of England’s 2% target until 2027.
Therefore, the impact of approaching its housing construction goals cannot be underestimated.
Regulators predict that the economy will grow by 0.2% in 2029-30 – to 0.4% over the next decade due to reforms (the capital value today is about £6.8 billion).
Reeves said this represents the biggest positive growth effect it predicts for taxpayers’ “zero-cost policies at zero cost.”
The policy will see more than 170,000 new homes and will reduce borrowing by £3.4 billion in 2029-30.
The regulator said Labor’s plan reform and the plan for up to 60,000 trained construction workers will cut the traditional tape festival “with additional and lasting impact on the materials, additional and lasting effects on home construction”.
OBR predicts output will increase by 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029.
But planning applications will have to withdraw from the downturn.
According to data from the Ministry of Housing earlier this month, the regional planning department approved 271,600 decisions last year, a 7% drop from the same period last year.
Damien Druce, business director for Black and White Bridge, said: “Since the start of the 2005 record, the number of planning applications submitted for the year ended September 2024 is the lowest.
“Homebuilders face high material costs, weak economy and low consumer confidence and have no new projects proposed at all.”
OBR estimates that real estate transactions will increase from around 290,000 per quarter at the end of last year to about 370,000 per quarter in 2029.
It said each quarter is about 9,000 higher than our October forecast “mainly due to program reforms.”
However, some in the real estate market are concerned that financial consumers need to fill these new homes.
Chris Sykes, SPF’s technical director of private accounts, said: “We hope that new construction will be a priority for lenders and tailor standards to support lending in this area.
“Building a home is only part of the solution, but it’s just as important to have first-time buyers access them.
“There is no announcement of changes to lifelong savings accounts, and stamp duty will take effect in the coming days, increasing the tax burden on many FTBs.”
