We’re almost there – Christmas and nearly a wrap for 2024. What a year, the property industry continues to endure rather than prosper but we are still here and look to brighter times around the corner. At propviews we won’t stop banging the drum for building more homes and generally giving no nonsense commercial assessments of what happens in the complex world of real estate development.
Here are my first six of twelve highlights summarizing the year we had and what we wrote about across the blog. Merry reading!
- Co-living has arrived like the partridge in the pear tree.
2024 was the year when co-living was accepted into the mainstream. Growing rapidly in response to consumer need/demand and because conventional forms of residential development are no longer viable.
Save for Manchester, regional co-living is in the foothills, but in the second city there are some huge schemes in lease up mode, and stabilized capital transactions are likely in 2025, boosting investor confidence. The year started with the GLA producing some detailed design guidance which gave the industry meaningful waypoints. The Mayor’s officers had listened to the industry and provided the market with some much needed certainty. One draw back is it does confine shared living to studio typologies with other arguably more affordable typologies like clusters omitted. Let’s hope this changes as the market evolves it offer.
On the ground, 7 notable second generation buildings completed and we would encourage anyone on fence to try to see a scheme and note how these buildings improve local streets and communities. We also witnessed one of the first stabilized co living-style assets trade to institutional capital. A small and first generation building but a pivotal confidence boost. There were 12 new coliving planning applications and 14 permissions granted, a total of 8,800 beds and if you are focused on housing numbers, the equivalent of 4,900 new homes. Even more noticeable is the amount of traditional affordable housing becoming viable alongside co-living buildings. Schemes of 70, 80, 90 social rent homes soon adds up to meaningful delivery.
- Two turtle doves to go with two rate cuts
Like the industry generally we spent a lot of time getting excited about rate cuts and trying to call the bottom of the market. In the end we got 2 in ’24 which is better than nothing but not as much as we were all hoping. The higher for longer mantra seems to be true.
We talked about rate cuts in our September blog and basically feel that even with further cuts, there is no guarantee the risk premium rate will settle down immediately. Rather, it feels we should price in higher rates and more sluggish growth for sometime to come. The budget hasn’t helped and with inflation closing back on 3% we remain concerned. This also brings back to the forefront much more significant supply side intervention to make up for the loss of cheap money in the system – it won’t be back. Expect at least two further rate cuts in 2025 but we don’t somehow feel we will get below 4% in the next 12 months based on latest economic data.
- Three French hens and Three Building Safety Gateways
As we wrote about in November we’ve all been fairly worried about the Building Safety Act and it’s translation into regulatory reality. We highlighted significant approval delays due to unclear submission requirements and low processing efficiency.
These delays increase costs, strain financing, and threaten project viability, especially for SMEs, while also conflicting with the government’s housing targets and risking the sidelining of sustainability goals. To address these issues, the industry needs clearer guidance, more efficient regulatory processes, early contractor engagement, and balanced implementation that supports both safety and the urgent need for sustainable housing solutions. We reckon there will be a shake up in 2025. The new gateway system is not working well.
- A new Government from four calling birds.
We couldn’t avoid talking about the election which saw four vocal political parties fight it out for seats but a clear winner in Labour. The industry felt this was good because they seemed to be the only party willing to grapple housing delivery in any meaningful way
Not only a clear winner but a big majority. However, while the result translated into a stomping majority for Sir Keir Starmer, the Labour Party only increased its share of the vote by 2% – and achieved less than Tony Blair in his three election victories as we pointed back in July.
However, a fresh Government means a fresh mandate and lots of talk of new homes. The 1.5 million pledge is a big theme on Linkedin and looks set to be continually challenged over the coming months. It’s still early days but 2025 is expected to be a big year for planning and housing reform as this new Government gets going.
- Five golden rings but not much golden brick out there
2024 was the year when we all really started to notice the Housing Associations had gone missing. Go back a few years and they were a big force in the land market able to buy sites efficiently and often with rather large land premiums. This has been muted for sometime but alongside less front end activity has also been a marked decline in 106 golden brick package deals.
Developers and house builders have begun to hit the panic button as consents began getting stuck with no one to take on a S106 housing package leading to more blockages in delivery. We touched on this in our September blog – over half the HAs are now out of the market. The situation continues to be of concern and we hope in 2025 the Government steps up to address what is a very significant issue for UK housing delivery. There are two ways it can do this. First pump more money in. The second, to relax requirements if there are no takers. Lets see how this plays out but play out it will.
- Six geese were laying but only one big merger
There was a merry go round of attempted marriages in 2024. Bellway and Crest failed to tie the knot and Cala was on a well advertised hunt for a suitor. The big new born news though was the Barratt merger with Redrow.
A whopping £2.5 bn creation with powerhouse potential in the housing sector. We wrote about Barratts back in April where they were halted by Wandsworth Council on their Springfield Hospital application. Despite this being a big upset in London, it was quickly brushed off as Barratts moved on and got the Mayor on board. The benefits of being a big beast.
Stepping back from the dealmaking it’s become pretty clear over 2024 that you really need to have very big boots to survive in the property and housing sector these days. We think there are only two ways to make it work at the moment. You either have to be so big that you can throw off the challenges and friction through economies of scale. Or so small that you can have a relentless focus on quality and detail and not get pulled apart by the many competing challenges that have beset our sector.
Anything in the middle is a bit of a dead zone unless you have a top quality management team and more hours in the day than most. What 2024 showed us was that just being quite big is not enough anymore.
Keep your eyes peeled for my next six over Christmas. Thanks all for supporting propviews. Onward.
