Home sale completions by the UK’s largest housebuilders could tumble by over 18,000 this year as a cocktail of headwinds hammer the market, new research reveals.
The Evening Standard looked at published figures from RBC Capital Markets on its estimates for completion numbers from FTSE 100 and FTSE 250 companies (Vistry was not included as the timing of its 2022 tie-up with Countryside could skew the results).
In total the seven businesses looked at (see table below), which include housebuilder giants such as Barratt, Persimmon and Taylor Wimpey, could sell 18,485 fewer homes in their current financial years, equivalent to a 27% plunge.
Companies have cut back on construction targets during a turbulent time since the controversial mini-Budget in Autumn 2022.
The industry has been grappling with various challenges from soaring mortgage costs hitting buyer demand, to the Help to Buy scheme closing to new applicants last October making affordability out of reach for numerous first time purchasers.
Anthony Codling, head of housing research at RBC Capital Markets said: "The impact of the mini-budget and the cost of living crisis sent shockwaves through the housebuilding sector and the housing market waters remain choppy."
Codling also pointed to recent house price weakness leading some firms to take a wait and see approach on some building.
the housing market waters remain choppy
Persimmon is forecast to have the biggest output fall in its financial year, 39.5%, although in its most recent results it guided to building at least 9,000 homes so could end up ahead of estimates. Its year ending in December meant its numbers have also been more impacted by the mini Budget than some rivals.
A spokesman for Bellway, which recently guided it is looking to build around 7,500 homes, down from 10,945 in the prior 12 months, said: “We anticipate continued headwinds from the stubborn inflationary environment and resulting increase in mortgage interest rates over the last year, which are impacting affordability and customer demand."
But he added: "The long-term fundamentals of the UK housing market remain and Bellway is very well placed to capitalise on future growth opportunities, when they arise.”
RBC's Codling said: "We expect The Bank of England to win the war on inflation and when they do, we believe that Bank Rate will start to fall, returning stability to the mortgage market. Meanwhile wages have been rising so as mortgage rates fall homebuyers mortgage capacity will increase."
Steve Turner, executive director of the Home Builders Federation which in March warned that housing supply could drop by up to 122,000 homes per year, today said: "Builders can only build if buyers can buy and a lack of affordable mortgage availability or government support is reducing home ownership options."
Turner also said much more decisive action from the Government is needed, that supports people who want to buy. He said barriers to delivery also need to be addressed, such as around planning, that are costing jobs and reducing economic activity.
The industry will be watching closely for any updates that could boost sales when chancellor Jeremy Hunt announces the Autumn Statement on November 22.
A DLUHC spokesman said: “We have announced £10 billion investment to increase housing supply since the start of this Parliament, and despite the challenging economic headwinds we are on track to meet our manifesto commitment of building one million homes."
“Our long-term housing plan will also allow us to go further and deliver more homes in the right places without concreting over the countryside.”
