According to a recent survey, 86% of housebuilders don’t believe that the Government’s homebuilding target is achievable.
The findings show that the majority of developers believe the construction of an additional 250,000 homes a year is the maximum amount feasible by 2022, falling short of the government’s 300,000 target by 50,000.
The annual housebuilding report by Knight Frank also revealed that just 1% of respondents think surpassing 300,000 additional homes each year is possible by 2022.
David Fenton, Head of Regional Land at Knight Frank, said: “Nationwide, housebuilding looks set to increase, underpinned by more evenly distributed house price growth and high levels of employment in regional cities. However, our survey indicates that scepticism prevails among housebuilders over whether it’s possible to deliver 300,000 additional homes a year, and ultimately they will only build what they can sell.”
The findings also show that, while 61% of developers plan to increase the number of homes they build during the next 12 months, there is a real split between larger and smaller homebuilders. In fact, while 92% of large developers intended to increase construction starts in 2018, 57% of smaller firms plan to decrease activity or leave output unchanged.
The news comes as the Government appoints Kit Malthouse as its fourth housing minister in two years, with Dominic Raab moving to “Brexit secretary” following the resignation of David Davis. As a result, there are concerns that a lack of continuity means that the housing sector is not being taken seriously enough in the face of the current Brexit crisis.
The Government has commissioned a report looking at the barriers to building more homes. Former Tory minister Sir Oliver Letwin is overseeing the inquiry. Last month, draft analysis was published asserting that ‘absorption rates’ – the rate at which house builders can sell new build homes in a local market without reducing the local market price – is the critical factor limiting the speed of housebuilding.
However, while the Letwin review focusses on challenges after the planning process is complete, Knight Frank respondents overwhelmingly believe that planning issues are the most significant barrier to speeding up development. Indeed, 39% of those surveyed identified it as the main hurdle.
The Knight Frank report also looked at the impact of the Help to Buy Equity Loan Scheme. Nearly half of respondents said that ending the scheme in 2021 would have an adverse effect on the supply of homes they were able to deliver. Despite this, most developers (two-thirds) do think the scheme should end, although 50% want a tapered withdrawal while 14% believe it should stop altogether in 2021. Only 36% believe that Help to Buy should continue indefinitely.
Commenting on the findings, Justin Gaze, Head of Residential Development Land at Knight Frank, said: “Whatever ministers decide, they must speak up soon if they are to avoid weighing on the supply of homes. The industry has shown itself capable of adapting to change, but businesses in every sector strain to operate amid policy uncertainty.”
David Fenton, added: “As our respondents have identified in the survey, the market is not without its challenges, and continued policy uncertainty has the potential to weigh on output in the coming years.”