Demand for new homes down over 8% year on year in England

Consumer demand for new homes has fallen by 8% over the last year to its lowest level since 2013, according to the latest industry annual survey.

Small house builders report current buyer demand at 2.9 out of a potential five, down from 3.14 last year, and this is expected to fall further to 2.75 next year, the house builder survey from the Federation of Master Builders shows.

The survey, which is the only annual assessment of small and medium sized house builders in England, also found that 48% attribute the fall in buyer demand to a lack of consumer confidence.

The four main barriers to SME house builders are availability of land, planning departments, access to land and access to skills and all of these have improved over the past year.

Access to land remains the top barrier with 43% of builders citing this as the top barrier, down from 59% in 2018, followed by 42% reporting that it is the planning system, down from 51% in 2018 with the main reason being the ‘inadequate resourcing of planning departments’.

More than one third of small house builders, some 39% say access to finance is a major barrier to their ability to build more new homes, the lowest percentage since the survey began eight years ago. However, reported concerns about the level of loan refusals are at their highest in three years and those reporting a shortage of skilled workers fell from 44% to 26%.

‘Small house builders are starting to see the effects of Brexit uncertainty taking its toll on consumer confidence. Many prospective homeowners are clearly holding off buying until there is more political and economic certainty,’ said Brian Berry, chief executive of the FMB.

‘Hopefully this is just a short term pause, and that post-Brexit, demand will pick up once again. If not, and we enter a downturn period, the Government will need to consider how best to support SME house builders to avoid many firms leaving the sector,’ he warned.

‘The main barriers facing small house builders have started to ease but they are still present. This is the fifth consecutive year that small house builders have cited lack of access to available and viable land as the number one barrier. Small sites are the bread and butter of SME development, but unfortunately local authorities’ Local Plans are still far too focused on large sites,’ he pointed out.

He also pointed out that the increases in planning fees by 20% in January 2018 were supposed to lead to increased speed and delivery of planning services, but only 3% of our members have seen any improvement since the rise. In fact, 38% of small builders have seen the performance of planning departments worsen.

‘Builders are now paying more for an inferior service which needs to be addressed urgently as part of the Government’s proposals to accelerate the planning system,’ Berry added.