"If these supply and demand dynamics persist then we could see further house price inflation as a result."
Its analysis shows that housing completion levels by the seven largest UK housebuilders are down by 35% on average over the last 12 months, as evidenced by their annual results. These top seven housebuilders are responsible for 43% of the new homes built across the UK.
This sharp drop in supply from the major housebuilders is likely to be at least mirrored across the SME housebuilding industry. In a recent survey conducted by Close Brothers Property Finance and the Home Builders Federation (HBF), close to 40% of SMEs projected their growth to be down this year by between 10-50%.
Close Brothers predicts that the Government's Planning For the Future reforms "could hold the key" to reversing this decline. SMEs overwhelmingly state planning as their largest barrier to growth and, as referenced in the initial consultation documents, are disproportionately affected by planning delays – often with only one or two active sites at any one time, where costly and lengthy planning delays can bring their business to a halt. Close Brothers believes that the planning reforms would help to increase supply within the housebuilding sector but also provide SMEs with an even greater boost to their supply of homes - acting as a leveller to the market as a whole.
Frank Pennal, CEO of Close Brothers Property Finance, commented: “Our analysis clearly shows that the UK’s housing supply is reducing, by over a third in the major housebuilders, and we anticipate the SME market to at least follow suit based on our research. If these supply and demand dynamics persist then we could see further house price inflation as a result. We need 2021 to be the year of build, build, build, to not only provide the homes which this country needs, but also to reap the wider economic benefits that this industry brings to local communities in terms of employment and the wider supply chain.
“To reverse this decline in housing supply, we must remove the barriers in the way to delivery and also seek to redress the balance in the housing market away from what the Prime Minister has called the existing ‘oligopoly’. Planning reforms will remove the constraints on supply t from the whole industry, but also act a spring board to SMEs – accelerating their supply chains and also creating greater diversity in design and innovation. Housebuilding is not a tap which can easily be turned on, developments take months, and sometimes years, to come to fruition, so time is of the essence to implement these reforms.”
