New Government figures showing a sharp fall in the number of new housebuilding sites breaking ground has prompted accusations against developers of constraining supply to maint high profit margins.
Data from the Department for Levelling Up, Housing and Communities, led by Michael Gove, showed the number of sites where building work started on site was 21,300, down 68 per cent between 1 July and 30 September, compared to the same point a year ago.
In the year to 30 September, site starts fell from the previous year in six out of nine regions. Completions dropped in seven of nine regions from the previous year.
Policy: Michael Gove is in charge of the Department for Levelling Up, Housing and Communities
In the quarter ending September 2023, there were 58,810 new dwelling Energy Performance certificates (EPC) lodged, representing a 6 per cent drop when compared to the same quarter last year.
Charles Breen, owner of mortgage broker Montgomery Financial, told the Newspage agency the fall in housebuilding was ‘a cynical ploy from developers to constrain supply so as to keep the prices up and their profit margins high, and ultimately serve their shareholders.’
Speaking to This is Money, Stewart Baseley, executive chairman at the Home Builders Federation, said: ‘We have been warning for some time that if Government didn’t change its approach to housing policy, we would see sharp falls in supply and all indicators are now confirming this.
‘Recent years have seen the policy environment become increasingly anti-development and the implications are now becoming clear.
‘Falling housing supply, amidst an already acute housing crisis, has huge social and economic implications and should cause politicians to seriously consider their approach.
‘If further falls are to be avoided, we urgently need action to help buyers and reverse the misguided decisions ministers have taken on planning and nutrients policy.’
Earlier this week, the Home Builders Federation claimed planning delays continued to pose the ‘greatest obstacle’ to developers.
In the year ending September 2023, there were 237,030 new dwelling EPCs lodged. marking a 4 per cent fall when compared to the previous year, data from the Department for Levelling Up, Housing and Communities shows.
The biggest percentage decrease in completions for new-builds was seen in the North West, where completions fell 12 per cent from the previous year.
Completions increased in the east of England and London from the previous year, with London seeing the biggest jump of 17 per cent.
Notably, June marked the end of the transition period to new building regulatory standards in England covering energy performance and electric vehicle charging points, which may have skewed quarterly comparisons.
‘It is no surprise to see builders scaling back their operations’, Stephen Perkins, managing director at Yellow Brick Mortgages, said
The Department for Levelling Up, Housing and Communities, said: ‘Many housebuilders may have chosen to bring forward the start of project works to avoid the costs of complying with these new standards, and this has caused an unusually high peak in starts in the second quarter of 2023, and a corresponding low trough in the third quarter of 2023.’
It added: ‘This difficult to assess the underlying trend in starts this quarter and so it is not advised to draw conclusions from comparing this quarter directly with other quarters.’
However, Stephen Perkins, managing director at Yellow Brick Mortgages, told Newspage: ‘In a market with increasing building costs and house prices that are falling or static, it is no surprise to see builders scaling back their operations.
‘Whilst they will complete plots that are agreed, many new sites will be delayed as builders sit on their land banks and wait for better market conditions to build and sell new homes for maximum margins for shareholders.’
Rohit Kohli, a director at The Mortgage Shop, told Newspage: ‘Given the cost of borrowing in 2023 and the collapse in demand from buyers, it’s not surprising that builders paused or scrapped their plans in the second half of the year.
‘With reduced stock, this is going to amplify the issues people are facing, pushing up prices as mortgage costs reduce and more buyers enter the market.
‘If the 1 per cent deposit scheme is introduced then this is only going to increase demand and again drive up prices and make homes even more unaffordable for the people that need the scheme.
‘The Government needs to wake up and take housing seriously. Every area is in crisis, from renting and social housing to building.’
The Government’s target is to add 300,000 homes a year in England.
After climbing rapidly last year, mortgage rates are starting to ease, leaving developers hoping the market will pick up.
On Tuesday, Nationwide waded into the mortgage price war with a wave of rate cuts across its fixed rate and tracker deals. It unveiled cuts of up to 0.81 percentage points.
Its cheapest deal for those remortgaging with at least 40 per cent equity built up in their home is 3.88 per cent, with a £999 fee, which is a new best buy.
This week, reports surfaced suggesting the concept of government-backed mortgages for 99 per cent of a property’s value could be announced in Jeremy Hunt’s Spring Budget.
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