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As 2024 draws to a close Ben Cussons, Partner at Scrutton Bland, shares his insights on the key developments that have shaped the property and construction industry this year and offers a glimpse into what 2025 may hold.
From government changes and shifting interest rates to market slowdowns, challenges in supply chains, the collapse of one of the largest UK building companies, and ongoing material cost increases – it’s fair to say that 2024 has been a year of ups and downs for the property and construction sector.
Challenges facing the Property and Construction Industry in 2024
Let’s start with the housing and property market.
Affordability has become a dominant theme here, with reports – such as those cited in this Telegraph article describing Britain’s property market as being “in deep trouble” – showing that 38% of property listings have undergone price reductions. Suggesting potential buyers are being priced out of the market, and sellers are struggling to meet the demands of a more cautious market.
One of the most pressing issues this year has been the expiry of many fixed-term mortgages and the resulting increases in monthly repayments. As mortgage rates remain elevated, many homeowners continue to feel the financial strain. Coupled with a reduction in base rates, this mismatch has made it harder for people to buy or sell homes, leading to a significant slowdown in the housing market.
Material costs, driven by inflation, have added to the strain on both the property and construction sectors. The industry has seen persistent price increases, only exacerbating the challenges posed by the ongoing supply chain issues. Construction projects have been delayed, and costs have spiralled, adding further pressure on developers, builders, and homebuyers.
Government policies and economic shifts: What impact has 2024 had?
Government policies aimed at addressing the housing crisis have been a focal point in 2024. The Labour Party’s pledge to build 1.5 million homes over the next five years, with a target of 300,000 homes annually, has raised hopes for new housing developments.
However, the promise remains ambitious in light of the current skills gap in the construction industry. The ongoing effects of Brexit, and rising minimum wage and national insurance contributions, haven’t helped, making it even more difficult to meet these targets.
At the same time, the government has introduced various initiatives aimed at supporting affordable housing, such as promoting the regeneration of brownfield sites and expanding green incentives. Yet, the shortage of available land, particularly in the East of England, has made it challenging for developers to find suitable sites for new homes.
The Agricultural Property Relief (APR) and Inheritance tax changes for family farms announced in the Autumn Budget could lead to potential reductions in land prices, making more land available for development. But this will take time to materialise, and rightly will need to focus on balancing new building projects with preserving farmland and green spaces.
Higher interest rates and an uncertain economic environment over the last year have made investors more cautious. The increase in stamp duty relief for second homes is likely to continue to have a ripple effect on the market, especially for property investment transactions. And, as investors hold back, the slowdown in the housing market is compounded further.
The skills gap and labour shortages
The ongoing skills gap in the construction industry remains one of the sector’s most significant challenges. Brexit, combined with the rising cost of employment, including increases in the minimum wage and national insurance, has made it harder and harder to recruit a skilled and able workforce.
The industry has had to find ways to adapt. Builders are increasingly relying on technology and automation, but there is still a long road ahead to fill the skills shortage, particularly for more specialised roles.
The government’s “Get Britain Working” white paper aims to address this gap, but it remains to be seen whether it will have the desired effect in the short term.
So, what does 2025 hold for Property and Construction?
It’s expected that 2025 will get off to a slow start. And once the dust has settled on 2024’s changes there is optimism that the second half of the year will bring some improvement.
But for many businesses, the impact of “the budget to rebuild Britain” is likely to be felt most strongly in the early part of the year. With tighter costs, higher employment expenses, and less stock available, it’s possible that more companies could face financial struggles. Could we see another major collapse like that of ISG Construction? Only time will tell.
But it’s not all doom and gloom. There are several bright spots on the horizon.
For example, the Grenfell Tower enquiry has led to significant funding for the replacement of unsafe cladding materials, offering both tender opportunities and safety improvements across the industry.
Additionally, the government has committed to £500 million for pothole repairs (although whether this is enough to ‘fill the gaps’ remains to be seen) along with funding for infrastructure maintenance, which will support construction activity.
The healthcare sector looks set to receive significant investments, with the NHS planning extensive building projects, including a new hospital in West Suffolk.
Large-scale projects such as Sizewell C and school maintenance programs will help to inject some much-needed activity into the construction sector in the region.
And with the housing market continuing to slow, could there be a possibility of the government reintroducing the Help to Buy scheme or U-turning on the end of stamp duty relief for first-time buyers (currently due to end in April 2025) to stimulate the property market. After all, those with double-cab pick-ups will know all about government U-turns!
2024 – A year of reflection and adaptation
So, whilst the property and construction sectors continue to grapple with rising costs, affordability challenges and a shifting political landscape – there are still opportunities for growth and adaptation in 2025. Whether through government initiatives, infrastructure investments, or market adjustments, the future holds promise—albeit with some caution.
As the industry navigates these challenges, it will be crucial for all businesses to adapt to a changing economic environment and remain agile in the face of uncertainty.
Whatever 2025 brings for your business, we’re here to help with tailored financial support. Contact Ben or one of the team on 0330 058 6559 or email hello@scruttonbland.co.uk for an informal chat about how we can help.
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