Iwona Hovenko, senior real estate and European housing analyst at Bloomberg Intelligence, examines the volatile current state of the UK housing market and how this could affect building targets
The UK housing market’s resilience through numerous crises and headwinds over the last several years supports Bloomberg Intelligence’s view that it may withstand the new risks.
Even so, the UK housing market may not be completely immune, with signs of deteriorating activity – interrupting the slow recovery since 2024 – as housing transactions and mortgage approvals weaken and fall below their long-term averages.
The worsening UK housing backdrop could mean thousands of homes won’t be built, with completion estimates for the top six builders over the next two years slashed by 16,000 homes vs the 31 December 2024 consensus (down 10.5%) or 30,000-50,000 for the whole market. Lower rates are key to reviving activity, but the main lever – the end of the Iran war – remains distant. This makes UK government policy and fiscal discipline key to supporting demand for new builds.
Glacial UK homebuilding recovery could get worse
Lingering housing market headwinds could dampen an already tepid recovery in UK homebuilders’ completions, which may force the UK government to help lift new home sales, especially as volume expectations for fiscal 2026-28 have already been slashed vs December 2024 consensus estimates.
The rebound was already trailing the recovery following the global financial crisis. The weak backdrop has hit orders and reservations of major UK homebuilders, with Barratt, Bellway, Berkeley and Taylor Wimpey also trimming land purchases, which may hurt volume growth.
New home demand has trailed the wider market for years, making the recent softening concerning, given property portals Rightmove and Zoopla point to declining agreed sales. New builds also face competition from elevated existing home listings, which rose to a 12-year high in August, based on Rightmove.
Given the far larger number of secondary market home sales, even a small rise in listings may represent a large increase vs new-home volume. New homes also command a 15-20% price premium over existing homes, potentially pushing them out of reach of stretched buyers.
Tens of thousands of homes may not be built in next two years
Compared with consensus estimates at the end of 2024, expected completions for the top six UK homebuilders in fiscal 2026 were cut by almost 6,000 homes, with 2027 volume slashed by more than 10,000 (a 13% cut vs December 2024 views). About half of the 2026-27 reduction came from far lower estimates for Vistry, which faces a unique set of challenges beyond market headwinds.
Yet even excluding the troubled developer, this would still amount to about a 9% shortfall in 2027. If extended to a wider industry – based on the share of homes built by top five (24%) and top six (32%) homebuilders in 2024 – this could mean a total shortfall of about 30,000-50,000 homes that won’t be built in the next two years. The gap could be even bigger, as small and medium-sized developers may feel headwinds more than their larger peers.
Berkeley’s volume forecast faced some of the sharpest cuts vs the December 2024 view – down 15% and 24% in each of the next two fiscal years – as weaker macroeconomics exacerbate the ongoing London-specific woes. Meanwhile, Persimmon remains among the least affected, with estimates for total 2026-27 completions reduced by just 1.7% or about 420 homes.
Squeezed profit faces higher costs, weaker price pressure
Homebuilders’ profit estimates have fallen sharply vs 31 December 2025, with further reductions possible if a protracted Iran conflict worsens costs, prices, and demand. Most of the largest UK homebuilders are also expected to have a decline in fiscal 2027 profit vs the already-subdued 2026 level, based on consensus.
End of war, UK budget key to rates, housing demand rebound
Mortgage rates remain the critical lever for housing activity, with the resolution of the Iran conflict key to curbing inflation and pressure on rates, though such prospects now seem distant.
The 28 October UK budget release must also avoid undermining fiscal responsibility or weighing on growth through a greater tax burden, or it could add upward pressure on mortgage rates. Direct policy proposals are also vital for housing and overall sentiment, so the new government must provide market stimulus and not extinguish the early improvement in confidence.
Mortgage rates of about 4% or less – like those in early 2026, before the outbreak of the war in Iran – have supported housing activity. Though sub-4.5% rates could already help, that’s not the case for now. Only buyers with the largest deposits (40% or more) can count on rates of about 4.5%.
High rates make buyers wait for headwinds to ease
The spike in UK mortgage rates since late February, alongside economic jitters, may continue weighing on near-term confidence, with homebuyers delaying plans until headwinds ease. That’s as rates have climbed back to a level last seen in mid-2024, even as they remain far below the highs of 2022-23. Based on price-comparison site data – timelier than that from the Bank of England – the lowest mortgage-interest costs are now about 90 bps above their February level, at 4.5-4.6% for borrowers with large deposits (25-40%), only slightly below their recent 4.7-4.8% peak in mid-April. The best deals for those with 10% down payments are at 4.7% (5% and up in April).
Buyers with mortgage offers secured before the rate spike supported activity earlier this year, but resilience will be tested as those deals vanish. Even so, the latest report from Rightmove suggests a tentative improvement in buyer enquiries, which could help release some pent-up demand after many prospective buyers delayed plans in 2022-26.
Wide homebuilding gap vs goal needs help in more than one way
Even at the time of its announcement, the UK’s homebuilding goal was ambitious and at risk of falling short. Yet even the modest 2026-28 growth in completions, implied by estimates, could worsen if the persistent housing-market headwinds force builders to curb new project starts.
This makes government intervention even more important to propping up housing, potentially requiring more than one support lever. Beyond new-home buyer support, measures such as stamp-duty reform could also lift demand. A public-housing push and reduced regulatory burden could lift output, while SME-developer support could reduce reliance on large builders and diversify supply.
The outlook for UK homebuilders remains weak without a material easing in mortgage rates and a sustained improvement in affordability and buyer confidence. Government help is becoming increasingly justified to support demand and supply and prevent a further slowdown, even as high rates could still dampen some of the impact.
The post Crises in the market mean thousands of UK homes won’t be built appeared first on Planning, Building & Construction Today.
