UK Residential’s Flight through Turbulence
Suraj Lakhanpal, Business Development Director
Navigating Headwinds and Tailwinds facing the Housing Market and Future Living Trends …
One may wonder when we will truly appreciate the magnitude of the pandemic’s global impact on the everyday way of living in the UK. Hybrid working has transformed lifestyles, making optimising space in our homes more important than ever. Add to that, the energy price squeeze and cost of living headwinds, making the journey to a new norm longer and more turbulent. But what about those knock-on tailwinds that help our flight accelerate towards our desired destination? Here we observe how headwind events, impacting the housing market, often lead to positive tailwind innovation effects, and to stay relevant, the need to stay on top of future changes affecting the housing market.
It comes as no surprise that Rightmove recently observed that garden offices are now amongst the most sought-after house feature; suggesting the meteoric rise of video conferencing software is here to stay. Indeed, these software tech firms are investing huge sums in the future digitalisation of meetings taking place in the Metaverse. Will VR headsets soon become essential work equipment, to engage with colleagues in your firm’s Metaverse office? Will your avatar, or digital twin, be dressed in formal or casual attire?
Awareness of making UK homes greener, as a critical step in the roadmap towards Net Zero by 2050, is well-known. It is very much seen as the ‘Plan A’ in ticking off the ‘E’ in ESG agendas for most firms operating in the residential sector. For developers and builders, however, new building standards mean more headwinds to navigate; notably a ban on fossil fuel heating systems in new homes from 2025. For larger schemes, that means adoption is needed now to ensure later phased homes are compliant with new rules. Now exacerbated by prevailing energy cost crises, carbon-efficient homes not only mean cheaper bills, but also premium values due to demand from buyers and renters alike.
Whilst new homes and those older stock requiring mortgages will allow the government to lever policy incentives, what about the 10M+ homes owned outright? Whilst energy price spikes will enhance payback periods on green improvements, it remains uncompelling. Rightmove also observed that buyers are starting to negotiate offers factoring in the cost of green improvements. Could the energy crisis be the headwind that pushes older households to finally change flight, to smaller, more-efficient homes so they maintain living standards? In turn, this could become a catalyst that enables younger generations, in their prime home-buying years, to improve older, low-EPC homes stock via greener retrofitting works; ultimately, a tailwind towards destination Net Zero?
The UK’s housing supply-demand imbalance and affordability factors are likely to take several years to fix. Fingers remain firmly crossed that planning departments can be fuelled by government policies towards quicker decisions abilities, to help keep the UK’s housing pipeline engines switched on at least. The coming months may well define currents and effects on house prices – will those doom and gloom headwinds or the supply squeeze in new stock prevail? Future government and monetary policies need to consider proportions and types of home sales sensitive to rising rates in a supply-constrained environment. At what level could interest rates overcome affordability and weigh down on home sales pricing and/or volumes?
A tough set of questions to answer. With a significant pipeline stuck in what feels like a nationwide planning bottleneck, no quick fixes seem possible to cure the shortage of new homes built in recent years. So, in a fast-changing environment, arguably yet to fully embed the global pandemic’s disruption to how we live and work, one could argue that the case for innovation has never been more critical in recent times. Microsoft’s CEO, Satya Nadella, is unequivocal in his belief that “The next 10 years will be a historical inflection point for digital technology, acting as a deflationary force in an inflationary world”. Seeing it as “…the only way to navigate the headwinds we are confronting today.”
How our work and home lives evolve over the next few years remains uncertain in these turbulent times, but looking out for the longer terms of goals and how they apply to construction and the latest living trends are more important than ever to be able to negotiate the headwinds.
Development Finance With BLG
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