UK Government's 1.5m Housebuilding Target Faces Major Setback as Barratt Reduces Land Purchases

The UK government's goal to build 1.5m homes in England during this parliament has hit a major obstacle. Barratt, the country's largest housebuilder, has scaled back its land purchases, citing a 'less certain backdrop' due to the Iran war. This move is expected to result in the acquisition of between 7,000 and 9,000 plots, down from the previously anticipated 10,000 to 12,000 plots.

The reduction in land purchases translates to approximately £100m less in spending, out of a budget of £800m-£900m. While Barratt's 'disciplined approach' is not a complete halt, it is a significant scaling back. This development comes as the government's target already seemed out of reach, with 208,600 new houses built in 2024-25, down 6% from the previous year and well below the required annual average of 300,000.

The government's ambitious target was always dependent on big housebuilders like Barratt to drive growth. However, with interest rates and mortgage rates not expected to fall this year, and energy costs rising, the market conditions are becoming increasingly challenging. The industry is proposing more support for housebuyers, but the Treasury is likely to be cautious about the potential inflationary effects.

In conclusion, the government's 1.5m housebuilding target is facing significant headwinds, and it is likely that the goal will be missed. The reforms to planning and the reintroduction of hard targets for local authorities are steps in the right direction, but the impact of the Iran war and economic uncertainty will likely act as a further brake on progress.