96% of home builders hesitant to build new homes in the UK
Key Points
- 96% of SME home builders are hesitant to invest in new homes.
- 61% expect to start fewer homes in the next three months.
- Taxes, levies and inflation add around £76,000 to each new home.
- Mortgage rates near 6% are keeping buyers away from new-builds.
- 93% say first-time buyer support could boost their building plans.
The Home Builders Federation (HBF) and Quantum Development Finance found that 96% of SME home builders are hesitant to invest in new homes.
The latest quarterly survey from the two organisations also found that 61% of small and medium-sized builders expect to start construction on fewer homes over the next three months.
That figure is up from 52% last quarter and more than double the 29% at the start of the year.
Builders are also pulling back on land, with 58% expecting to buy less over the next three months compared to 27% in January.
Development viability topped the list of supply constraints, with 84% of respondents naming it as a problem, up from 75% the previous quarter.
New taxes, levies and inflation have added around £76,000 to the cost of building each new home, the HBF said.
Planning delays came next on the list, with 72% of builders citing them as a barrier.
On the demand side, builders named wider housing market conditions (69%) and low buyer confidence (64%) as their biggest challenges.
Mortgage rates have also become a growing concern for 41% of respondents, as lenders reprice their products ahead of expected Bank of England base rate rises.
Builders in the South West reported the most negative outlook at 88.9%, followed by the South East at 83.7%.
The East of England (71.4%) and London (70%) also showed mostly negative sentiment among smaller builders.
Ahead of the Budget, 95% of respondents said they are not very confident or not at all confident that the government will deliver meaningful improvements for the sector.
Builders see one clear route to more homes, however. Three quarters said the proposed Your First Home equity loan scheme for first-time buyers or Stamp Duty Land Tax reform could encourage them to plan additional site starts.
A further 18% said such measures could bring forward sites already in their pipelines, taking the total to 93%.
The government plans to reintroduce first-time buyer support through the Your First Home scheme, with details expected in the Budget.
The HBF wants the government to reduce the cumulative cost of building new homes, remove fiscal barriers to development and unlock Section 106 affordable housing delivery.
It also called for greater long-term funding for local planning authorities to strengthen their planning capacity.
“Small and medium-sized home builders are finding it increasingly difficult to operate as both the cost and burden of building each home continue to rise,” said Neil Jefferson, Chief Executive of the HBF.
“In real terms, this means fewer homes being built as the cumulative impact of rising costs, planning delays and uncertainty makes it increasingly difficult for smaller developers to bring sites forward.”
“As we look to the Budget announcement, government has a real opportunity to stimulate housing delivery by addressing these pressures,” Jefferson added.
“Our survey shows SME builders are caught between rising costs and falling buyer demand, and the wider market tells the same story,” said Oliver Thompson, Chief Executive of Quantum Development Finance.
“With two-year fixed mortgage rates now close to 6% and a rate rise widely expected next month, buyers are holding back, and home builders can’t commit to new sites without confidence that homes will sell.”
“The Budget must deliver a well-designed Your First Home scheme alongside action on costs, or the homes this country needs simply won’t get built,” Thompson said.
