What are the biggest issues for housebuilders?

The UK housebuilding industry has had a tough few years and this one is no exception. In fact, after the Covid year of 2020, this year’s proving to be one of the most challenging yet. But what are the biggest issues for housebuilders? How are they impacting sales and completions? And what do they mean for new home buyers? We take a look…  

Interest rates  The recent sharp rise in interest rates is affecting the whole of the housing market. And for those building new homes, there’s been a slowdown in sales as consumers worry over mortgage costs. And this consumer caution extends to the longer term with concern over what will happen to rates over the next few years, not just now. With buyers holding off on a new build home purchase, many leading housebuilders are forecasting reduced numbers of completions. And sales of new homes are taking longer, with hesitant buyers less likely to buy early build stage plots. Instead, buyers who are committed, are waiting with a preference to see properties at the nearly finished stage.


For smaller housebuilders, the high interest rates are affecting them in other ways. And this is due to the fact they operate their business differently to the larger housebuilders, being more dependent on borrowing. Take for example buyers who have a property to sell before buying their new-build home. The interest rate rise has led to a more cautious housing market across the board, so it is taking longer to sell all homes, even older ones. And with this happening, smaller housebuilders are facing increased borrowing costs. In a positive, optimistic market, the wait from reserving a new build to completion might have been a couple of weeks. Now, as house sales slow, it is taking months to exchange contracts which is putting pressure on the working capital of smaller, regional housebuilders.

Cost of materials
A medley of occurrences in recent years has led to a catalogue of supply and demand issues in the construction sector. The impact of Covid lockdowns, the war in Ukraine, and global inflation have all led to an increase in the cost of materials. Over the last two years, data shows that material costs have risen 43%. The good news is that wood and fabricated and structural steel costs have fallen by nearly a quarter in the last year. But the materials showing the highest annual price increases include insulating materials, ready-mixed concrete, and screws.

Staff and expertise
The construction sector has struggled in recent years due to an ageing workforce, but Brexit has also hampered the sector significantly. Housebuilders from the smallest to the largest are desperate for bricklayers, plasterers, groundworkers, plant operators and carpenters to name a few construction roles. Despite the government having recently added these to its ‘shortage occupation list’, the industry has suffered significant staff losses from the time Brexit kicked in.

With the availability of labour being an issue, construction worker wages have been rising too, affecting smaller housebuilders. Larger housebuilders can capitalise on their size and scale to afford to secure the best staff. But at the other end of the scale, the financial pressure is taking its toll.

Planning systems
The length of time it takes for planning applications to go through is also a burden on small to medium-sized housebuilders. In fact, a survey done this year by the Home Builders Federation showed, ‘93% of SME housebuilders cited delays in securing planning permission or discharging conditions as a major barrier to growth.’

Not only are the requirements for all housebuilders incredibly complex when it comes to planning, but the system is felt to be outdated. Local authority planning resources don’t deliver a good enough service, which comes down to significant cuts in their resources and the whole system is felt to be too politicised.

But there was good news for housebuilders this week when the government announced they would relax the EU-originated nutrient neutrality rules to allow the construction of around 100,000 homes across the UK. We’ll cover more on this over the coming weeks.

Demand prevails
There is still positivity out there when it comes to new build homes. They remain popular thanks to how much cheaper they are to run compared to older properties. As well as lower energy bills, homeowners need not fork out for extensive home improvements. Location is also key to their demand, as is pricing. Developments in the right location with excellent transport links, access to good schools, and the chance to enjoy green spaces nearby remain popular.

So yes, while there is a slowdown in housebuilding driven by the fall in house prices across the country, it is not expected to be anyway near as bad as the complete housing crash during the financial crisis of 2007-08.  

Incentives to buy

For those who are in a good position to buy and can ride the wave of the high interest rates, it could be a good time to buy a new build home. You might well be able to negotiate a price discount with the housebuilder, especially if they are down to the last couple of homes on a plot and struggling to sell them. It pays to do your homework on the development and see what prices other homes are selling for on there, as well as how long homes have been left standing without being sold.

And consider discussing other incentives with your housebuilder, such as having your stamp duty paid. Or you could negotiate for a better specification of flooring or white goods. Depending on when you are looking to buy the property in the build stage, there might well be different options available. But speak to your housebuilder and don’t be afraid to ask questions around offers and incentives. During a difficult market, you might just get lucky.

Despite the downturn, there are still plenty of new build homes being built across the country. You can find your dream new home by searching our website of new homes available from a wide range of housebuilders across the country. Start your search here.

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