The number of registrations of planned new homes by builders has fallen to its lowest level since lockdown in spring 2020 as they try to prop up prices, new research has shown.
Figures published by the National House Building Council, the UK’s largest provider of new home insurance and warranties, show that the number of new homes registered with them has fallen by more than half year on year.
Registrations occur when a developer or homebuilder registers their intention to build a new home.
The NHBC says the number of new homes registered fell 53 per cent in the third quarter of this year compared to the same three-month period last year.
Construction cuts: Housebuilders’ plans include far fewer homes than last year, according to figures from the National Home Building Council.
In July, August and September of this year, a total of 20,680 new homes were registered, compared to 44,153 during the same three months of 2022, a drop of 53 percent.
This was the lowest number of registrations recorded in a three-month period by the NHBC since April, May and June 2020, when the property market closed during the first Covid-19 lockdown.
During that three-month period, a total of 20,024 new homes were registered, just 656 fewer than the number recorded in the three months between July and September this year.
According to Anthony Codling, head of European housing and building materials research at RBC Capital Markets, British housebuilders are slowing the pace at which they build homes to protect house prices.
He said: ‘The number of new build homes for sale and the number of sites launching soon is declining as housebuilders slow construction to protect the price.
“We believe this is a function of the weaker sales market – homebuilders will work to limit the arrival of homes on the market to avoid an oversupply if demand is weak.”
Lockdown: This is the lowest number of registrations over a 3-month period recorded by the NHBC since the three months between April and June 2020 and the first Covid-19 lockdown.
The NHBC covers between 70 and 80 per cent of all new homes built in the UK.
It said new housing registrations by private sector companies were down 57 per cent year-on-year, while rental property and affordable housing registrations were down 43 per cent.
In addition to the collapse in new registrations, he also said the number of new homes completed has fallen 15 percent year-on-year.
Steve Wood, chief executive of NHBC, said the slowdown in house construction was due to economic conditions.
He said: ‘Housebuilding activity is a key indicator of the health of the UK economy.
“With interest rates stubbornly high, inflationary pressures persistent, an ineffective planning system and an increasingly complex regulatory environment, it is no surprise that fewer homes are being built.”
However, he remained confident in the future of house prices, mirroring other housing market forecasts this week.
“While consumer confidence has been hit by high mortgage rates and rising costs of living, new home prices are generally holding up, in part due to sales incentives,” Wood said.
Midlands and North hardest hit by construction cuts
Regional split: NHBC registrations fell a massive 74% in the West Midlands, 71% in the North West and 66% in the North East
Regionally, new build registrations fell a whopping 74 per cent year-on-year in the West Midlands, 71 per cent in the north west and 66 per cent in the north east.
Areas that saw smaller falls included Wales at 25 per cent, the South West at 34 per cent and London at 38 per cent compared to last year.
Northern Ireland completely bucked the trend, with registrations up 52 per cent.
Some property types have also been hit harder than others. For example, NHBC registrations for single-family homes are down 62 per cent and bungalow registrations are down 70 per cent, while apartment registrations are down 39 per cent.
Batch down the hatches: British housebuilders are slowing the pace of house construction to protect house prices
NHBC’s findings align with the latest construction monitoring survey from the UK’s Royal Institution of Chartered Surveyors (Rics), which has recorded its most pessimistic monthly result since the early months of the pandemic.
This survey is a quarterly opinion survey of almost 1,400 chartered surveyors operating across the UK.
He said construction workloads are now in negative territory and residential housing construction in particular is slowing.
This, he said, was because homebuilders were facing fewer sales and tougher price negotiations.
Most respondents reported it was more difficult to obtain a mortgage and two-thirds said this was limiting housing market activity in their areas.
Bungalow hit: NHBC registrations for single-family homes are down 62% and bungalow registrations are down 70%
Labor shortages and rising costs: 40% of respondents continue to draw attention to problems when hiring bricklayers, carpenters, plumbers and electricians, according to Rics
Sam Rees, senior policy officer at Rics, said: ‘The latest reported drop in housebuilding highlights the urgency of launching a structured, holistic plan to tackle the housing crisis.
“While the Government’s recently announced intention to achieve its target of one million new homes before the end of this parliament is laudable, details are still lacking on how this will be achieved.”
Simon Rubinsohn, chief economist at Rics, added: ‘The more difficult environment around the property market is now manifesting itself in terms of a slowdown in the rate of construction of new developments, according to comments from Rics members.
“This suggests that housing supply is likely to fall over at least the next year, compounding the problems already faced by many of those looking to take a first step on the property ladder or enter the rental market.”
Will the Government do something about the lack of housing?
Most people agree that the UK has a housing shortage and that much more is needed.
Both the current Government and the Labor Party have committed to increasing the number of homes under construction.
The Conservatives have promised to deliver 300,000 new homes a year by the mid-2020s, while Labor says it will build 1.5 million homes over five years if it comes to power after the next general election.
What seems to be happening, at least in recent months, is exactly the opposite.
RBC’s Codling said that if the current situation persists, the likelihood of government stimulus will increase.
“The housing market is not in free fall, and the reduction in current construction will affect 2024 more than 2023, as homes built at this time of year will typically be delivered in 2024,” he said.
“If the housing market continues to slow, the likelihood of pre-election stimulus increases, and the impact of any stimulus tomorrow will likely outweigh today’s challenges.”
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