There’s another blow to the government’s ambitious housing targets today.
The Home Builders Federation (HBF) suggests the vast majority (70%) of small- and medium-sized home builders say that market conditions are limiting their appetite to invest in new sites.
Despite the government’s changes to the planning system and clearly-stated desire to increase housing supply, well under half (41%) of SME builders expect to increase the number of homes they start building in the next three months.
Just 28% of respondents reported a positive housing market outlook and 37% have a negative view of what’s in store.
Builders delivering up to 75 homes a year are the least optimistic with almost a third (28%) expecting housing starts to decline in the next three months, and 18% braced for a significant reduction.
When examining factors influencing the cautious industry sentiment, 70% of SME home builders say current market conditions are limiting their ability to start new sites, reflecting ongoing concerns about scheme viability, affordability and effective demand from homebuyers.
Higher deposits, stricter lending criteria and increased interest rates have all impacted access to mortgage finance and made home ownership harder to achieve.
The HBF says that without a strong market to sell in to, home builders’ ability to bring forward new development is constrained with 24% of respondents identifying market conditions as causing significant caution or delaying site starts altogether.
Housing market sentiment varies significantly across regions.
London – where both the affordability challenges and policy costs are most acute – reports the weakest outlook, with 57% of small- and medium-sized developers operating in this area expressing a negative view and just 14% reporting a positive outlook.
The South West (52% negative) and South East (51% negative) also show notably subdued sentiment. Similarly, the East of England records a higher share of negative (44%) than positive (22%) responses.
In contrast, Wales stands out as the most optimistic region for small firms, with two-thirds (67%) of developers reporting a positive outlook and only 17% expressing a negative view.
Demand-side challenges combined with rising build costs, additional policy costs and requirements are making it increasingly difficult for many projects to stack up financially. Reflecting this, 57% of SME builders identified viability pressures as a key barrier to delivery.
The survey’s findings come as the industry prepares for a doubling in the rate of Landfill Tax ahead of a 500% increase over the course of the Parliament and the introduction later this year of a new £340m per year levy on new homes.
The industry is also preparing for the introduction of the Future Homes Standard, which is expected to increase build costs by between 3% and 8%.
HBF is calling for a moratorium on new regulatory costs, taxes and levies on the industry, and for a comprehensive review of cost increases imposed by various government departments in recent years following a period of extensive tax and policy cost increases imposed by Defra (BNG), Treasury (Residential Property Developer Tax, Landfill Tax) and MHCLG (Building Safety Levy, Future Homes Standard).
