Increasing confidence linked to a more favourable mortgage market and housing affordability is seeing demand in the UK’s new homes market improve.
According to the latest study by Savills, new home starts in most UK regions (excluding London) are now above their two-year averages – albeit it from a low base – with some regions seeing nearly 70% more starts in Q2 2025 compared to the previous year.
The use of sales incentives for new homes is rising too, reflecting a more competitive market and ‘more reason for buyers to choose new build’.
However, a shrinking pipeline means buyers will not be overwhelmed with choice. While new starts are picking up, the increase is from a low base. The number of outlets run by the major housebuilders is still down 12% compared to their recent peak in 2018. A step change in supply will depend on both a greater flow of consented land, and further improvement in market conditions, to give developers the confidence to open more outlets.
The market has seen a difficult few years as high construction costs, labour shortages, planning delays and geopolitically volatile economic conditions all affect the delivery of housing. However, the most recent Home Builders Federation (HBF) quarterly survey shows these constraints have eased to varying degrees.
With limited price growth across the whole market over the last 6 months, coupled with falling mortgage rates, housing affordability has improved. For a buyer on a 75% mortgage buying the average priced property, monthly mortgage repayments have fallen by around 15% compared to late 2024.
Shyam Maharaj, Associate Director in Savills Research, says: “Sentiment around development finance and land availability has improved by an average of 43% compared to the previous year, but labour constraints have worsened year on year, continuing to present challenges, particularly for smaller builders with fewer economies of scale.
“Despite ongoing headwinds, the new homes market is trending toward a gradual recovery, according to starts data from the National House Building Council (NHBC). Housing starts in Q2 2025 have picked up, with 9 out of 10 regions (excl. London) showing starts above their respective 2-year averages. The East Midlands, East of England and Yorkshire and the Humber, had starts in Q2 2025 that were nearly 70% higher on average compared to the previous year.”
Within the new build market specifically, according to the report, buyers will also see more favourable conditions. Data from the NHBC sentiment survey shows net sales values adjusting downwards since the start of 2025.
Recently, this has been coupled with an uptick in the use of incentives, which climbed to the highest reading in the survey since mid-2023 and is cause for optimism, according to Helen Asteris, Savills head of south coast new homes.
Helen says: “For many buyers the increased availability of incentives helps provide the impetus to choose a new build home over options in the wider market. For developers, the timing of any asking price increases will be crucial, given the delicately balanced nature of the market.
“Positively, sentiment survey data from the HBF shows that buyer confidence, mortgage rates and availability have all seen improvements compared to where they were a year ago. While early days, this shift in sentiment will be critical to maximising the potential of the new homes market in the years to come and offers some green shoots of optimism in an otherwise challenging market.”
Several years after the pandemic and the “race for space” has not abated among new build buyers, with NHBC data showing that over the last twelve months, 39% of new build sales were properties with 4 or more bedrooms.
With the average age for getting on the property ladder now at 34, those first time buyers that remain in the market join home movers in looking for family housing rather than starter properties.
