New Government figures showing a sharp drop in the number of new housebuilding projects have sparked accusations against developers of limiting supply to maintain high profit margins.
Data from the Department of Levelling, Housing and Communities, led by Michael Gove, showed the number of sites where construction work started was 21,300, down 68 per cent between July 1 and September 30, in compared to the same point a year ago. .
In the year to September 30, construction decreased from the previous year in six of nine regions. Completions decreased in seven of nine regions from a year ago.
Politics: Michael Gove is in charge of the Department for Levelling up, Housing and Communities
In the quarter ending September 2023, 58,810 new energy performance certificates (EPCs) for homes were submitted, representing a drop of 6 percent compared to the same quarter last year.
Charles Breen, owner of mortgage broker Montgomery Financial, told Newspage that the drop in home construction was “a cynical ploy by developers to limit supply to keep prices and their profit margins high and, in ultimately serve its shareholders.
Speaking to This is Money, Stewart Baseley, chief executive of the Home Builders Federation, said: “We have been warning for some time that if the government did not change its approach to housing policy, we would see sharp falls in supply and all indicators are now confirming it.
‘In recent years the political environment has become increasingly anti-development and the implications are now becoming clearer.
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‘The fall in housing supply, amid an already acute housing crisis, has huge social and economic implications and should cause politicians to seriously consider their approach.
“If we are to avoid further declines, we urgently need measures to help buyers and reverse the wrong decisions ministers have made on nutrient planning and policy.”
Earlier this week, the Home Builders Federation said planning delays remained the “biggest obstacle” for developers.
In the year ending September 2023, 237,030 EPCs of new homes were submitted. which is a fall of 4 per cent compared to the previous year, data from the Department of Levelling, Housing and Communities shows.
The largest percentage decline in new construction completions was seen in the Northwest, where completions fell 12 percent from the previous year.
Completions increased in the east of England and London on the previous year, with London seeing the biggest jump of 17 per cent.
Notably, June marked the end of the transition period towards new building regulatory standards in England covering energy performance and electric vehicle charging points, which may have skewed quarterly comparisons.
“It’s not surprising to see builders scaling back their operations,” said Stephen Perkins, CEO of Yellow Brick Mortgages.
The Department of Levelling, Housing and Communities said: “Many housebuilders may have chosen to bring forward the start of project works to avoid the costs of meeting these new standards, and this has caused an unusually high spike in starts in the second quarter of 2023, and a corresponding minimum in the third quarter of 2023.
He added: “It is difficult to assess the underlying trend at the beginning of this quarter and therefore it is not recommended to draw conclusions by comparing this quarter directly with other quarters.”
However, Stephen Perkins, managing director of Yellow Brick Mortgages, told Newspage: ‘In a market with rising construction costs and house prices that are falling or static, it is not surprising to see builders scaling back their operations.
“Although they will complete the agreed plots, many new works will be delayed as builders sit on their land banks and wait for better market conditions to build and sell new homes and make maximum margins for shareholders.”
Rohit Kohli, director of The Mortgage Shop, told Newspage: ‘Given the cost of borrowing in 2023 and the collapse in buyer demand, it is not surprising that builders paused or scrapped their plans in the second half of the year.
‘With reduced stock, this will amplify the problems people face, driving up prices as mortgage costs reduce and more buyers enter the market.
‘If the 1 per cent deposit scheme is introduced this will only increase demand and again drive up prices and make homes even more unaffordable for people who need the scheme.
‘The Government needs to wake up and take housing seriously. All areas are in crisis, from rent and social housing to construction.’
The Government’s aim is to add 300,000 homes a year in England.
After rising rapidly last year, mortgage rates are starting to fall, making developers hopeful the market will rebound.
On Tuesday, Nationwide waded into the mortgage price war with a wave of rate cuts across its fixed and tracker rate deals. It revealed cuts of up to 0.81 percentage points.
Its cheapest offer for those remortgaging with at least 40 per cent equity in their home is 3.88 per cent, with a fee of £999, which is a new best buy.
This week, reports emerged suggesting the concept of government-backed mortgages for 99 per cent of a property’s value could be announced in Jeremy Hunt’s Spring Budget.
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