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2 November 2023
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Two new reports have highlighted the depth of the slowdown in housebuilding across the nation
The latest UK Construction Monitor published by the Royal Institution of Chartered Surveyors (RICS) shows a dramatic fall in private housebuilding with its members reporting a significant drop in workloads in this sector (see graphs below).
The report, which captures workload activity for the whole of the construction industry every quarter, saw survey respondents reporting a decrease in activity across all sectors (- 10 per cent on its index) with new business enquiries also plummeting.
Two-thirds of contributors told the RICS that issues with finance and the credit environment were ‘limiting current activity’.
RICS chief economist Simon Rubinsohn said: ‘The tougher environment around the housing market is now coming through in terms of a slowing in the build-out rate of new developments according to feedback from RICS members.
‘This suggests that housing supply is likely to fall at least for the next year compounding the problems already being faced by many of those looking to get a first step on the property ladder or move into the rental market.’
Rubinsohn added: ‘Chiming with growing concerns about the rising level of insolvencies in the sector, the survey also highlights the tougher credit environment being faced by many developers. Significantly, financial constraints are now viewed as the major challenge by the industry.’
A similar picture has been painted by industry tracker Glenigan’s latest construction review, covering the three months until the end of September 2023.
Residential starts remained down, falling 10 per cent during the period and standing 26 per cent lower than a year ago.
Glenigan’s comparison of the projects listed in its database showed that private housing starts had dropped 23 per cent on last year’s figures while social housing had plummeted by 37 per cent against the 2022 data.
Commenting on the review, Glenigan’s economic director, Allan Willen, said: ‘Starts on site continue to soften and, as economic and political disruption continues, we’ll likely see clients and contractors continue to adopt a cautious approach to start dates until the landscape looks a little less hostile.’
Responding to the data, Alex Ely of RIBA Stirling Prize-winning practice Mæ Architects said the reported drop in house-building was ‘entirely in line with our observation’.
He told the AJ: ‘With housing supply almost entirely dependant on the private sector, it is inevitable that cost inflation and a drop in values leads to a slowdown. Housebuilders focus on their margins, not on housing need, and the public sector supply isn’t large enough to offer any resilience.’
He added: ‘While the [RICS] report focuses on housing starts at a national level, I anticipate the statistics will be worse in London and metropolitan areas where issues around redesign as a result of the Building Safety Act take effect. New starts are likely to worsen over the next quarter as a consequence.
‘Initially, we had to pull schemes with buildings over 30m from planning to redesign them, and subsequently schemes exceeding 18m –sometimes the same projects. This has led to a lost year of momentum.’
Inconsistent fire engineering advise is further exacerbating the problem
Ely claimed the two-and-a-half year transition period for mandating a second staircase rule in new buildings above 18m, recently announced by the housing secretary, had come ‘far too late to keep a pipeline of projects on track’.
He said: ‘Meanwhile the lack of government guidance means we are getting inconsistent fire engineering advice, which is further exacerbating the problem.’
However he concluded: ‘On the positive side. we are seeing an increase in masterplanning commissions, which suggests a positive longer-term pipeline of supply.’
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