2019 Predictions: #4 – Will Britain eventually start to build upwards?

Modular housebuildingGiven that Britain is a relatively small island with a much higher population density than other European countries (for example, Sweden has 20 and the UK has 267 persons per square km), isn’t it strange that the majority of housing developments still have a focus on larger individual houses with gardens, rather than blocks of flats, and in the offices sector, that we’re building single storey offices on greenbelt land, rather than multi-storey or high-rise blocks on brownfield land?

In the cities, there has been some development of flats, but a lot of these have been at the luxury end, while demand has largely been for affordable housing. London, unlike other international cities, is considered ‘low-rise’ for a global city, even in the financial centre, which does have a fair few high-rise office or mixed-use buildings. There are a few drivers that could lead to a change in this area, aside from the more obvious ongoing shortage of development land and rapid population growth in major urban areas.

The first is the continued growth in the build-to-rent sector, which was originally driven by acute shortages in the rental market, particularly in larger cities where many workers are unable to buy a property. The build-to-rent sector has attracted financial backing from both domestic and foreign property investors and has become one of the fastest growing sub-sectors of the property market, having more than doubled over the past decade. One reason for this is that other sectors, such as offices and retail, have suffered from a lack of confidence and investors are looking for growth. This growth is slowing though, and it should be noted that a large share of the overall private rental sector is made up of terraced and semi-detached houses rather than flats.

Student accommodation is also an area where construction has grown strongly, and the purpose built student accommodation (PBSA) market has also emerged as a key investment sector over the past 5 years or so. According to a report by AMA Research, there are now over 200 commercial PBSA operators in the UK, and since only around 18% of students live in university operated halls, there remains an undersupply of student accommodation in many university towns. Prospects for this sector remains bright, despite some uncertainties related to the effect of Brexit on foreign student numbers, and newbuilds are likely to be in either low-rise or high-rise blocks of flats or halls of residence. As an example, a few months ago, plans were unveiled for a 55-storey student accommodation skyscraper in Manchester city centre.

Lastly, there is an acute shortage of affordable housing generally – and more specifically, social housing for rent. The new build levels for social housing have been well below requirements for a long time, and the sector has also struggled with funding issues caused by increased financial constraints on local authorities and social rent cuts. Recent figures from the Ministry for Housing, Communities and Local Government indicated that the number of homes built for social rent has fallen from almost 30,000 ten years ago to around 6,400.

There are various existing plans and funds aimed at stimulating delivery of affordable housing, but in many areas, ‘affordable’ rents are not within reach of most people, and the majority of affordable housing development continues to focus on home ownership in various forms rather than the basic need for somewhere to live. It looks as though things may change though – the Mayor of London recently launched the ‘Building Council Homes for Londoners’ programme for social rented housing, and in October 2018, the Government announced it will lift the limit on local authority borrowing.

And only the other week, a cross-party housing commission released a report urging the government to launch the biggest council and social house building programme in history to build more than 3m new social homes over the next 20 years – that is more than were built in the two decades after the end of the Second World War. Whether this plan will be supported by the current government remains to be seen, but the signs are certainly positive.

The Grenfell Tower fire tragedy has led to concerns about the safety of high-rise buildings, with the Hackitt Review recommending a new regulatory framework for tower blocks with 10 or more storeys. There are particular concerns with regards to fire safety, material safety and structural robustness, so perhaps we won’t see that many more tower blocks appearing in 2019, but as a start, there could be an increase in blocks of flats and office buildings with 4-6 storeys?

MRA Research specialises in market research and insight within the UK construction industry, and can undertake a wide range of studies and surveys. Get in touch to find out more.

5 predictions for UK construction and the built environment in 2019

#1 – Changes in buying behaviour will lead to major changes to the distribution structure

#2 – A focus on integration will stimulate a move towards smart homes

#3 – The uptake of offsite & modular construction and prefabricated components will get a boost

#4 – Britain will start to build upwards

#5 – Electric vehicles will become a common sight on UK roads

You may also like
Builders’ Merchants’ sales grow 9% despite second lockdown
The Pulse: Merchants see light at the end of the tunnel
Builders’ Merchants’ October sales a varied mix of highs and lows
The Pulse: Merchant expectations and confidence cool