Savills has given an upbeat assessment of how the new homes sector has performed so far in 2024 – but it is laced with a warning too.

In terms of the good news, Savills says the relatively optimistic mood on interest rates in January and February meant that net reservations of new homes spiked to a net balance of +21 in February relative to last year. Sales rates amongst major house builders have also improved to an average of 0.77 per outlet per week in March, up from 0.59 at the end of 2023.

Savills says: “The flurry of activity at the start of the year demonstrates the depth of pent-up buyer demand that can be released when the cost of debt eases. The latest predictions are that the bank base rate will be cut within the next few months – with financial markets now pricing it in for August. Although the market may be stop-start until that point, a rate cut will likely result in more market activity in the second half of the year. Our longer-term outlook for the market expects increasing activity and capacity for price growth from 2025, helped by a stronger economic performance and a steady reduction in the bank base rate.”

But the agency puts a question mark over whether the new build industry can deliver the product in time for the growing demand.

It forecasts that housing delivery in England is set to fall to its lowest level for a decade, with starts on sites on all homes (including affordable and rental homes) down -24%, while private units are down -26% in the year to Q1 2024 compared to 2023, according to NHBC data.

The drop in development activity is placing increasing pressure on markets that have already failed to meet housing need, according to the Savills analysis.

Some 35% of local authorities across England did not meet housing need over the past year, and their pipeline is shrinking. Clusters are most evident in London, much of the South East and parts of North. Data from NHBC confirm that local authorities currently delivering below need and have a shrinking or flat pipeline have also seen a dramatic fall in starts over the past year in the wider area.

Places such as Brighton and Hove, Medway and Kent, Surrey, Norfolk and Greater Manchester have all seen starts on site fall by over 40%.