2021 was a fruitful year for the new homes sector, demonstrating plenty of resilience as it rebounded from a challenging 2020, which was heavily impacted by Covid-19. In the first quarter, completions reached a 20-year high and demand for new homes was at record levels. Strong levels of demand are expected to continue into 2022, though it is not expected to reach the peaks of last year.
A busy year will be defined by a number of trends which our team have predicted below.
Increased customisation in construction
Buyer requirements have changed significantly in recent years. There is an increasing expectation that buyers can tailor some finishes to a new home. For decades housebuilders have been able to build homogenous buildings which offer buyers little to no choice in how the home is finished. As buyers begin to expect and exercise higher levels of choice in all aspects of their lives, the traditional method of building similar standardised homes is being bought into question. Developers that adapt to the shifting landscape and offer a more personal finish will flourish in 2022 and beyond.
Offering choice in housebuilding presents certain challenges however there is software that is reducing the complexities of this process. Previously offering choice with the interior design of a new home would be a time-consuming manual task that is complicated, prone to error and costly. Interactive 3D virtual tours reduce this complexity and manage the process for housebuilders, buyers and contractors. Companies such as revvis are transforming architectural plans by employing real-time rendering when creating 3D models of a building. With real-time rendering companies can produce immersive virtual tours of any property or a larger development. Buyers can use these 3D models to explore any property or development whilst planning, decorating and furnishing their desired property, visualising results in real-time.
Interactive 3D virtual tours will provide those forward-thinking housebuilders that adopt this technology to stay ahead of the curve a clear competitive advantage in 2022 and beyond.
In recent times the government have pushed the strong commitment to make the UK net-zero carbon by 2050. In late 2021 the policy Build Back Greener was first published which was a wide range of policies and proposals to decarbonise all sectors of the UK economy.
With pressure on natural resources and the uncertainty of climate change, it is important that homes are built in ways that provide benefits for both residents and the environment. Homes that are constructed using sustainable building practices are often more energy-efficient resulting in reduced expenditure on utilities. This year there is a cost-of-living crisis in Britain with energy prices soaring whilst inflation is expected to jump from 5.4% to more than 7% in Spring. The cost of food, fuel, national insurance contributions and increasing interest rates are squeezing households across the UK.
Homes that contribute towards helping the UK meet its aim to be net-zero in 2050 whilst saving the homeowner on energy bills will come at a premium in 2022.
Green roofs improve air quality, boost thermal performance, improve drainage amongst many other benefits for the homeowner and environment.
In 2020, the Covid-19 pandemic shut down global economies, forcing companies worldwide to scramble to arrange for employees to work from home. This resulted in several challenges for employers and employees alike. Key challenges for employers were deciding which hardware and software were needed to enable workflows to continue unaffected. Whereas employees had to juggle housemates, children, school runs amongst many other issues as the boundary between personal and professional lives merged. This has impacted the residential landscape as buyers are now looking at purchasing in locations outside of urban centres. Buyers who no longer need to undertake the daily commute to their office have the luxury of searching in more affordable markets.
Developers need to think about including spaces that are designed for WFH or are flexible and can be adapted to WFH requirements. The demand for outside space will continue and developers building in less dense areas will benefit from taking these lifestyle demands into consideration when planning new schemes.
Employees have had to increasingly juggle both professional and personal responsibilities as more people shifted to WFH.
Rise of the modular housebuilder
The modular housing sector will see continued growth in 2022 as awareness in the UK of modern methods of construction (MMC) continues to grow. There will be a rising demand for building methods with a lower environmental impact and increased government initiatives. The 2021 report ‘Build Homes Build Jobs Build Innovation’ which was authored by a major government advisor, asks the government to make modular the driving force behind its ‘build, build, build’ agenda.
In 2021 a shortage of construction materials saw a surge in pricing which is expected to remain a challenge for housebuilders in 2022. Rising material costs will accelerate off-site construction by increasing the number of factory-made components of a building. This in turn significantly reduces the costs of the materials for housebuilders.
New modular builder Corehaus launched their Sunderland factory over the summer of 2021 and in a short time have secured a strong pipeline of developments delivering their Modular Homes across the North East and North West of England.
A prefabricated unit is being craned into a modular residential development.
The final year of Help To Buy
Help to Buy (HTB) is scheduled to end permanently on March 31, 2023, and we anticipate 2022 to be an extremely busy year for HTB as buyers look to take advantage of the scheme. First-time buyers (FTB) are likely to seek HTB eligible properties in one last hurrah trying to benefit from the scheme before it comes to an end.
HTB has been in operation for nearly 10 years, but in more recent times the scheme was scaled back, with eligibility criteria changing. Only available to FTB'ers in England with more restricting eligibility criteria, fewer and fewer buyers could use the scheme. The looming abolition of the scheme altogether will likely leave a gap in the market for some housebuilders who will be looking at ways to increase demand from other demographics.
Recent years have seen phenomenal selling conditions which have allowed developers to sell more properties later in the development cycle. There will likely be a shift in prioritising a higher proportion of off-plan sales to ensure financial risk is manageable. Owner-occupiers and nuanced investors will return in greater numbers. They’ll be seeking to achieve value understanding developers will be prioritising more off-plan sales, earlier in the construction cycle. This presents an opportunity for developers to adopt software that enables them to connect with buyers and begin selling their developments earlier. The continued emergence of innovative 3d virtual tour software allows homebuilders to digitally launch their developments with immersive viewing experiences from as early as planning permission is granted.
Developments will always be subject to changing market conditions but financial risks can be mitigated by ensuring off-plan sales remain strong throughout the lifecycle of the development. Interactive 3D virtual tours demonstrate to buyers the potential of the space even before construction has begun, promoting earlier sales.
Return of overseas investors
In the years running up to 2016 overseas investors were a large proportion of all off-plan new homes purchases in the major urban cities. The introduction of the 3% stamp duty surcharge in 2016 tapered demand from overseas investors which continued until last year when signs showed they were beginning to return to the market. In August 2021 Knight Frank said its web traffic data showed nearly a quarter (24%) of users looking at sales and lettings properties in August were based abroad.
The recent Omicron variant again bought about travel restrictions which quelled interest from overseas investors in late Q4 2021 but the reopening of travel will be expected to bring back demand from overseas investors.
Virtual reality and 3d virtual tours are playing an integral role in ensuring overseas investors are able to return to the market without having to travel for viewings. Until recently it was normal for most international buyers to ask a trusted friend or relative in the area to do a physical tour of a property before an offer could be made. VR showings and virtual walkthroughs are quickly becoming the norm for foreign buyers, eliminating the need to have boots on the ground for viewings and ensuring foreign buyers have a greater understanding of what they are purchasing.
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