In recent years, there has been an air of uncertainty in the property and construction sector, however, the change of government last summer seemed to bring this to an end.
With the election of the new government came the promise of a new focus on growth - of which construction would play a major part - so there seemed to be a collective sigh of relief.
However, since then, the government’s more recent announcements have caused speculation that growth will be slower than first hoped and the mood has once again been dampened.
Across all areas of property and construction, there will be lots of challenges ahead this year - as well as lots of opportunity - so it’s important that the sector is prepared for these.
Shortly after the election last summer, the government promised new mandatory local housing targets as part of its plans to build the homes the country needs.
Although the exact details of these plans are yet to be confirmed, we do know that the government is aiming to build 1.5 million new homes over the next five years, which is great news for developers.
But, to ensure these developers can quickly react to local needs without being tied up in red tape, there will need to be a streamlining of the current planning system - otherwise these housing targets will become unachievable.
The recent increase in Capital Gains Tax could also make it difficult for smaller developers as they work towards these targets. This is because landowners will be reluctant to pay the additional tax on sales, making it more difficult for developers to secure the land they need.
Costs will remain a key concern for developers this year. From April we will see the planned increase in employer’s National Insurance, as well as the National Living Wage and National Minimum Wage, which will make it difficult for developers to deliver housing at the right price. These wage hikes come at a particularly bad time too, as the government has launched a new skills hub initiative to hire thousands more apprentices in the construction sector - and the wage increase for those aged under 21 is 16%.
However, looking past the wage increases, the new skills hub initiative is a real positive for the sector. It will deliver fast-track training through 32 new Homebuilding Skills Hubs, resulting in 5,000 more construction apprenticeship places per year.
What’s more, the government’s Get Britain Working whitepaper aims to tackle the biggest drivers of unemployment and inactivity and promises “the biggest employment reforms in a generation”, which will certainly help to relieve concerns about labour supply in the sector.
By mid-2025 we can expect to see the new Renters’ Rights Bill become law and it’s predicted that this will lead to some private landlords exiting the rental sector.
As a result of this, we could see large numbers of properties entering the market, leading to lower asking prices and lower demand for new housing.
However, an alternative opportunity could be presented to developers through the government’s plans to deliver 5,000 new affordable social homes and the £500m funding from the Affordable Homes Programme. Here, developers will have increased opportunities to work with local authorities and social housing providers to deliver this target.
There still remains a sense of doubt regarding the funding that will be available in 2025 for major infrastructure projects. The Chancellor has committed to funding the tunnelling work for HS2 into London, which was a welcome announcement, but this could come at a cost to smaller scale projects across the country.
Similarly, the formation of the British Infrastructure Taskforce looks as though it will unlock government and private investments to deliver long-term projects.
These measures may give construction businesses the confidence to upskill and expand their workforce this year, but it’s unlikely they will result in the start of significant new infrastructure projects.
Only time will tell how property and construction firms will adapt to these upcoming changes, but firms can put themselves in the best position for success by being aware of the opportunities and challenges they present.
For those who need the support of an expert adviser in navigating these changes, get in touch with our property and construction team today.
