New findings from the Home Builders Federation鈥檚 (HBF) SME Sentiment Survey show that 70% of SME home builders say that market conditions are limiting their appetite to invest in new sites.
The latest quarterly HBF survey shows the sector to be cautious about the outlook for the housing market. Developers in London are especially pessimistic.
Despite the government鈥檚 planning reforms and ambitious targets, 聽just 41% of SME builders expect to increase the number of homes they start building in the next three months. Only 28% of respondents reported a positive housing market outlook and 37% have a negative view of what鈥檚 in store.
Companies that build fewer than 75 homes a year are the least optimistic with 28% expecting housing starts to decline in the next three months, and 18% braced for a significant reduction.
When examining factors influencing the cautious industry sentiment, 70% of HBF members said current market conditions are limiting their ability to start new sites, reflecting ongoing concerns about scheme viability, affordability and effective demand from homebuyers.
Market pressures continue to be major challenges for the industry as a whole. However, these pressures are particularly acute for SME developers, who, by virtue of their size, are less able to absorb market volatility or manage prolonged delays and rising costs, the HBF said.
Housing market sentiment varies across regions. In London, 57% of SME developers express a negative view and just 14% have a positive outlook. The southwest (52% negative) and southeast (51% negative) also show notably subdued sentiment. Wales stands out as the most optimistic region for small firms, with 67% reporting a positive outlook and only 17% expressing a negative view.
The survey鈥檚 findings come as the industry prepares for a doubling in the rate of Landfill Tax ahead of a 500% increase over the course of the Parliament and the introduction later this year of a new 拢340m per year levy on new homes. The industry is also preparing for the introduction of the Future Homes Standard, which is expected to increase build costs by between 3% and 8%.
HBF is calling for a moratorium on new regulatory costs, taxes and levies on the industry, and for a review of cost increases imposed by various government departments in recent years following a period of extensive tax and policy cost increases from Biodiversity Net Gain regulations, Residential Property Developer Tax, Landfill Tax, Building Safety Levy and now the Future Homes Standard.
Elsewhere, despite industry support for recent reforms, the planning process continues to present a major obstacle to delivery. More than three quarters of respondents (76%) identified planning delays as one of their top three supply-side barriers to building more homes.
The research also suggests emerging pressure on the future housing pipeline with 27% of SME developers expecting to reduce land acquisitions in the next three months, citing both cost and availability as key issues. This reduction in land buying could have long-term implications for housing supply if market conditions do not improve.
Neil Jefferson, chief executive at the Home Builders Federation, said: 鈥淪mall and medium home builders play a vital role in a healthy housing market and in increasing housing supply. However, they are also the ones most impacted by the ongoing market conditions, lack of demand, and rising taxes and policy costs. While planning changes have been positive much more is needed to address the concerns of SMEs to enable them to play their part in delivering more homes.
鈥淧olicymakers must recognise the impact of rising taxes, levies and policy costs on the viability of new housing schemes. At the same time, the lack of support for first-time buyers continues to constrain demand. With strong public backing for a new equity loan scheme for first-time buyers, there is an opportunity to explore targeted measures that help buyers while supporting delivery.
鈥淲ithout further action on both viability and affordability, the government鈥檚 housing ambitions will become increasingly difficult to realise.鈥�