Government plans to deliver 1.5 million new homes by 2029 face mounting challenges as official data shows a consecutive decline in new-build construction output over recent months.
Office for National Statistics figures reveal that private sector residential new-build completions in Britain fell from 3,309 units in May to 3,103 in August, representing a 6.2% decline over the three-month period. The figures dropped to 3,293 in June and 3,163 in July before reaching the August low.
Industry concerns over viability
Terry Woodley, MD of Development Finance at Shawbrook Bank, commented on the data: “A fall in construction output shows that conditions remain mixed for the sector. For developers weighing up their next project, build costs, borrowing costs and buyer demand all need to stack up.”
The decline follows warnings from major developers about scheme viability. Earlier this month, Taylor Wimpey announced it had ceased building new homes in London, stating that the viability of new schemes had “evaporated” due to prohibitively expensive development costs.
Industry body Real Estate:Scotland has warned that the viability of new housing in Scotland has reached “breaking point”. In June, Savills projected that the government’s 1.5 million homes target would be missed by more than 660,000 units.
Market conditions affecting delivery
While existing homeowner enquiries for new builds have shown recent increases, developers face challenges in responding to demand. Neil Leitch, Managing Director of Development Finance at Hampshire Trust Bank, noted: “Encouraging more people to buy new-build homes is one thing, but developers also need to be in a position to respond to that demand. That requires a consistent pipeline of viable schemes and sufficient confidence for developers to commit capital and start building.”
Woodley added that predictable planning times are crucial for helping developers manage costs and commit to start dates. He suggested that the government’s Your First Home scheme could support buyer demand, whilst the forthcoming Budget presents an opportunity to introduce practical support for smaller developers.
The consecutive monthly decline in new-build output raises questions about whether current market conditions and policy frameworks are sufficient to support the government’s ambitious housebuilding targets over the remainder of the decade.
