Despite the short-term uncertainty created by Covid-19 during the course of the year, the demand for all tenures of housing remains robust.

There remains significant support from both national and local Government. Countryside’s commitment to offering a balanced mix of tenure types, which differentiates us from other major housebuilders, allows us to develop sites more quickly and means we are less exposed to any slowdown in the private for sale market.

Macroeconomic environment

Market performance across the past 12 months has been dominated by the unprecedented effect which the coronavirus pandemic has had across the world’s economies as well as the continued political uncertainty created by the UK’s decision to leave the European Union.

Despite these historic events, demand for housing of all tenures has remained remarkably strong, with mortgage approvals quickly recovering to pre-lockdown levels and house price increases demonstrating the extent of pent-up demand within the housing market. The Government’s objective to satisfy this strong demand through the delivery of 300,000 additional homes annually by the mid-2020s is being advanced but remains some way off, with 179,000 homes delivered in 2019.

Looking forward, there is a significant degree of uncertainty as to whether such positive sentiment will be maintained. Whilst interest rates remain low, there has been a reduction in mortgage availability with many of the high loan-to-value products being withdrawn, particularly affecting first-time buyers.

Furthermore, as Government support for employees and businesses affected by the coronavirus pandemic tapers off many forecasters project an increase in unemployment levels.

Government affordable housing programme to deliver
180,000
homes over eight years

St Michael's Hurst, Bishops Stortford

Changing consumer priorities

A consequence of the response to the coronavirus pandemic has been to prompt homeowners and renters to re-assess the ideals which they look for in a home.

As technology has made working from home a reality for many, early trends suggest that customers are more willing to accept increased commuting times as compromise for larger homes with more outside space.

Government policy and future regulation

The Government’s Help to Buy scheme continues to support people’s ability to own and move home, with c.36% of UK home purchases in 2019 being via the scheme. The scheme is only available for new build homes and from 2021 further restrictions will come into force preventing its usage on properties which exceed regional price caps or by individuals who are not first-time buyers. The Help to Buy scheme will run until 2023.

In addition to Help to Buy, the Government remains a strong supporter of the housebuilding industry through several recently announced initiatives, including the £12bn affordable housing programme to deliver 180,000 homes over eight years, a pilot programme to deliver 1,500 discounted First Homes and a new shared ownership scheme. The Government also released its “Planning for the Future” white paper in August which outlines a series of reforms which will ultimately speed up and modernise the planning system.

Certain short-term, specific policy changes were implemented in response to the coronavirus pandemic, most notably the temporary relaxation allowing for the first £500,000 of qualifying property purchases to be exempt from stamp duty land tax. Historically such a change has had the effect of accelerating, rather than increasing, demand for homes; therefore, the benefit from this change may well unwind over time. However, its effect of providing much-needed liquidity in the second-hand homes market is welcome.

The industry continues to improve quality through the tightening of its regulatory environment. Fire safety remains an area of focus with amendments to existing and emerging legislation ongoing as well as continued focus on the industry’s sustainability credentials. The Future Homes Standard which will drive improvement in the energy efficiency of new homes through low carbon heating and world-leading levels of energy efficiency is expected to be in force by early 2021. The New London Plan, while not formally adopted, further progressed during the year and sets the standard for developments in London. This includes new requirements for information, such as Circular Economy and Whole Life Cycle Carbon Assessment, for each development along with monitoring and reporting requirements for carbon on major developments.

In January 2020, the Government released the publication “Building Better, Building Beautiful – Living with Beauty” which promotes best practice in terms of promoting heath, wellbeing and sustainable growth, setting the bar higher for industry standards.

In September the Government announced enforcement action against a number of housebuilders, including Countryside, in respect of potentially unfair terms concerning ground rents in leasehold contracts.

Mixed-tenure approach

The decline in home ownership since 2003 is a trend which has been driven both by a lack of affordable housing as well as increasing barriers to private ownership as house price growth has outstripped earnings growth.

The lack of affordable housing is being addressed through the Government’s recently announced £12bn affordable housing programme which runs from 2021 to 2026, with half of the homes delivered being for affordable home ownership.

The effect of reduced levels of private home ownership has been to increase the proportion of renters in the marketplace and consequently increase the levels of activity in the professional PRS market from both PRS providers and institutional investors. To improve the affordability of private home ownership the Government is seeking to promote faster delivery of homes on large strategic sites through its “Planning for the Future” white paper

Supply chain and modern methods of construction ("MMC")

The housebuilding industry is exposed to a number of risks with regard to the pricing and availability of materials and labour. Should a deal with the European Union not be agreed by the UK Government then the industry will need to deal with the consequences of World Trade Organisation (“WTO”) tariffs coming into force, potential customs delays, labour restrictions and increased currency fluctuations.

MMC is also becoming a key Government and industry focal point both in terms of how housing delivery can be accelerated to meet the 300,000 homes target mentioned previously but also as a way of improving build quality and building safety. There are a number of different elements to MMC which cover a range of approaches that encompass off-site, near-site and on-site pre-manufacturing, process improvements and technology applications. Although the industry has yet to fully embrace non-traditional build, several methods of off-site construction are emerging from use of prefabricated elements to timber frame construction to complete modular build. The case for off-site construction continues to grow driven by benefits including build speed, enhanced quality assurance, reduced waste on site and the opportunity to do more with the existing workforce. Indeed, some public procurement bids, including tenders put out by Homes England, require use of MMC and commitment to a pace of build in order for participants to qualify to bid.

Off-site timber frame construction used on
64%
of our output

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