Tough year ahead’ for housebuilders
2022-07-04Housebuilder representatives have warned that increases in inflation and supply chain issues are causing delays to UK housing delivery.
Leading figures in residential property have told Property Week that the operating environment for housebuilders “is becoming increasingly challenging” due to rising costs compounded by red tape from Brexit, the conflict in Ukraine and labour shortages.Stewart Baseley, executive chairman of the Home Builders Federation, said: “Demand for new homes remains strong, but the operating environment for builders is becoming increasingly challenging. We are now seeing a range of factors constraining growth and creating delays, particularly in the planning process.”
New research from consulting firm Turner & Townsend has served as a warning to developers to brace themselves for further rises in construction costs, which will have an impact on the viability of planned projects.
The study ranked London as the most expensive UK city to build in, while construction costs are also rising fast elsewhere. In Leeds, the price of structural steel has soared by 43.3% over the past year to £3,000 per tonne and inflation is forecast to reach 10% in the city this year.
Martin Sudweeks, UK managing director of cost management at Turner & Townsend, said the high build costs in London reflected the strong demand for land and “ongoing supply chain pressures compounded by Brexit and the impact of the war in Ukraine”.
Listed housebuilders have acknowledged the inflationary pressure but have played down the impact on their pipelines, telling shareholders in recent trading updates that build cost inflation had been “offset with sales price inflation”.
Crest Nicholson said in its 2022 half-year results: “No one in the construction sector is immune from the current impacts of input cost inflation. However, we are managing to successfully offset this with sales price inflation in a market with strong demand and relatively poor levels of supply.”
Meanwhile, in its latest update, Taylor Wimpey group finance director Chris Carney said that the firm’s 22% operating margin target had become more challenging, but maintained it was “achievable and a valid target for the business”.
Small housebuilders have also reported a delay in output to trade body the Federation of Master Builders, whose chief executive Brian Berry said: “Small local housebuilders’ output has been on the decline for some time. With material prices at all-time highs and labour shortages ongoing, local housebuilders are facing a tough year ahead, which will not help turn their fortunes around.”
He added: “We’ve also seen 55% of members delay jobs due to a lack of skilled tradespeople.”
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