UK Housing Market
Labour’s 1.5 Million Home Target at Crisis Point as Planning Approvals Fall and Construction Slows to Record Low
Planning approvals drop 2% to 242,610 and construction PMI falls to 44.6, marking its worst performance in nearly five years
David Hannah, Group Chairman of Cornerstone Tax, criticises Labour’s poor policy decisions, emphasising that the slowdown in the housing market is exacerbated by decisions that have increased costs for developers and landlords
Labour’s plan to deliver 1.5 million homes by 2029 is in crisis, as official data shows a sharp decline in planning approvals and the slowest pace of construction since 2009. Last year, local authorities approved just 242,610 planning applications, 2% fewer than in 2023 and a quarter lower than the 2019 peak of nearly 330,000. Additionally, construction output has fallen spectacularly with the S&P Global purchasing managers’ index (PMI) for the sector dropping to 44.6 in February - well below the growth threshold and the lowest reading in nearly five years. In light of this, David Hannah, Group Chairman of Cornerstone Tax, the UK's leading stamp duty advisory firm, highlights that the slowdown is compounded by poor policy decisions that have raised costs for developers and reduced incentives for new projects.
David argues that the government's lack of joined-up thinking is currently enormously damaging to the residential property market, emphasised by the residential building index seeing a steep contraction to 39.3, marking the worst performance outside of the pandemic since the financial crisis. David criticises Labour’s refusal to reinstate multiple dwellings relief, alongside its increase in the second home surcharge and higher national insurance contributions, which has made large-scale developments less viable. The government’s adjustments to stamp duty thresholds have further disrupted investment in new housing, limiting opportunities for growth in the sector. Exclusive data from Cornerstone Tax further underscores the impact of these stamp duty reforms, revealing that 26% of Brits already are already unable to purchase property due to unaffordable stamp duty costs. In addition to this,19% of UK tenants have had to move rental properties five times as landlords are forced to exit the market.
As a result of these measures, developers have reduced land acquisitions, and many are operating from fewer sites than in previous years. In 2024, only 9,776 new sites were approved - the lowest figure since records began in 2006. Furthermore, to meet Labour’s 1.5 million home target the number of planning approvals would need to rise by 53% annually, yet current trends point in the opposite direction. With developers facing mounting financial and regulatory barriers, new projects are stalling and housebuilding remains far below the levels required to alleviate the UK’s housing crisis. David argues that without urgent policy adjustments, the decline in construction activity and the slowdown in planning approvals will continue, with Labour’s housing ambitions at serious risk.
Adobe
David Hannah, Group Chairman of Cornerstone Tax, comments:
“The decision from the government to lower stamp duty bands shows a concerning deficit of joined-up thinking. Does this Chancellor and Prime Minister not understand that if they want 1.5 million new homes, they cannot drive landlords out of the market, incur additional charges for first-time buyers and freeze up working capital for developers – which can only be available if these homes are selling. I expect stamp duty receipts to fall significantly and then flatline in Q1 2025, potentially plunging the British property market into a desperate situation. In essence, reducing stamp duty thresholds means that it will ultimately be the consumers who foot the bill.
“Furthermore, it would make sense for the new Government to suspend, or even abolish, the 5% surcharge where properties are being acquired for private rental sector investment. Removing this measure would encourage landlords to increase their holdings, rather than exit the market – reversing the decline in the supply of rental homes and potentially expanding it to the point where demand no longer outstrips supply.”
David Hannah, Group Chairman
