UK’s biggest housebuilder announces it will cut construction spending as ministers are accused of being anti-development
Ministers have been accused of being ‘anti-development’ as one of the country’s biggest builders said it would drastically cut construction.
The Home Builders Federation (HBF), a trade association representing companies responsible for 80 per cent of new homes built in England and Wales each year, said the end of measures such as Help to Buy meant there was “no government regulation to support start-ups at the time when it is most needed’.
The lobby group also warned that a lack of affordable mortgages had “inevitable consequences for housing supply.”
“Builders can only build if buyers can buy and, coupled with the government’s broader anti-development policy approach, particularly in planning, the lack of mortgage availability is inevitably impacting housing supply,” said an HBF spokesman.
Help to Buy was a scheme that enabled first-time buyers to borrow money from the government to help them purchase new homes. It ended in October last year.
Slump: The Home Builders Federation said the end of Help to Buy meant there was ‘no government scheme to support first-time buyers where they are most needed’
The broad side of the HBF came when Barratt Developments, the UK’s largest homebuilder, revealed it could build 20p per cent fewer homes this year amid a downturn in property markets.
The FTSE 100 company expects to build between 13,250 and 14,250 homes in the 12 months to June 2024, up from 17,206.
Chief executive David Thomas said the backdrop “has become more challenging in recent months,” with many potential buyers experiencing “significant cost-of-living pressures.”
The value of the order book fell to £2.2bn at the end of last month from £3.6bn a year ago.
Interest rates have risen from 0.1 percent to 5 percent since December 2021, driving up the cost of mortgage repayments and making higher demands on potential buyers, with the cost of two-year, fixed-rate mortgages hitting a 15-year high this week.
Barratt’s bleak outlook sent shockwaves across the industry. The stock fell 1.6 percent or 6.8 pence to 411.2 pence, while rival Persimmon fell 0.1 percent or 1.5 pence to 1049.5 pence and Taylor Wimpey fell 0.3 percent or 0.35 pence to 104.5 pence.
Things were equally bad for the FTSE 250 builders: Bellway fell 0.4 percent, or 8p, to 2022p, Crest Nicholson lost 3.2 percent, or 6p, to 182.6p, and Vistry fell 0.9 percent, or 6p, to 681p.
“For years, homebuilders benefited from near-perfect conditions. Buyers could easily borrow at extremely low rates, the government provided its own help, and supply and demand dynamics supported rising prices,” said AJ Bell’s Danni Hewson.
“That is no longer the case and so margins and profitability are under pressure.”
The number of homes built in Britain peaked at 425,830 in 1968, but fell to a low of 135,590 in 2013, according to data from the Office for National Statistics.
Although numbers have since recovered slightly, they remain well short of the government’s target of 300,000 a year, tightening supply and driving up prices.
That has made it even more difficult for starters. Ministers have also come under fire for seemingly not doing enough to solve the problem.
In a report today, the House of Commons leveling up, housing and communities committee said it would be ‘difficult’ for the government to meet the 300,000 mark if mandatory local housing targets were dropped as part of planned reforms.
Commission chair Clive Betts also warned that annual housing construction would “fall to about 150,000 a year” under the plans and that the shakeup was “already having a detrimental impact on efforts to increase new home construction”.