The government and local planning authorities are being urged to react urgently to a dramatic slump in the sales of new homes as increasing mortgage rates and the end of Help to Buy incentives add to the deepening housing crisis, according to a new report by Savills.

The report, The New Normal for Housebuilding: The importance of sales outlets in a market without Help to Buy, highlights the inconvenient truth, that there has been a declining trend in the number of planning consents for many years. The level of delivery of the recent past was only possible due to the government’s demand-side support of Help to Buy and stamp duty holidays boosting the sales rates from fewer outlets.

It has been prepared by Savills on behalf of the Land Promoters and Developers Federation (LPDF) and strategic land promotion specialists Richborough Estates.

The Savills report comes just a week after the LPDF claimed the number of new homes built each year in England could slump to its lowest level since the second world war due to a perfect storm of government policies and higher mortgage rates.

On the future of new homes delivery, the report says: “Weaker market conditions will result in lower sales rates, with our analysis indicating a rate of between 0.5 and 0.6 sales per outlet per week. This range, and particularly the lower end of this range, will continue until we see an improvement in housing market conditions. Indeed, Savills do not think it is likely that sales rates per outlet will recover to the 0.67 sales per outlet level seen before the global financial crisis.

“The issue of low sales rates is compounded by the trend towards an ever diminishing supply of available sales outlets. A restrictive planning system will exacerbate this issue, with fewer sites expected to gain consent over the coming years. Lower sales rates, fewer sales outlets and the reduction in active parties delivering new homes will mean a substantial reduction in new home delivery.”

Among its recommendations, the report says local planning authorities (LPAs) need to recognise the substantial reduction in sales rates that has emerged over recent months and make an urgent assessment of the likely future sales rates that are not based on a continuation of the recent past. LPAs should bring forward more housing development sites that allow housebuilders to open more outlets. “Only by doing this will we maintain and increase housing delivery volumes,” it states.

It also calls on the planning system to actively create opportunities for SME housebuilders and new entrants.

“The sustained fall in the number of smaller sites (less than 100 dwellings) gaining consent is a major barrier to SME growth and new entrants to the housebuilding market. Changes to the National Planning Policy Framework (NPPF) should empower LPAs to actively create opportunities for smaller builders and new entrants in their areas through the allocation of smaller sites. This would support the wider Government agenda to reverse the decline in SME builders and increase competition in the housebuilding sector,” adds the report.

LPDF chairman Paul Brocklehurst said: “Many of us have realised for a long time that Help to Buy and low mortgage rates have masked the fact that the planning system has not been delivering enough sites for new homes. This report highlights the inconvenient truth of the failure of the planning system to deliver for a number of years.

“LPAs have been consenting larger sites which, with higher sales rates from each outlet, has enabled the industry and the country to achieve the recent levels of total new homes built. However, the market conditions have changed dramatically in recent months and now, with the withdrawal of Help to Buy and the new mortgage rate environment, sales rates per outlet have reduced significantly and therefore, to maintain volume, we need more sites – which the system hasn’t been delivering. Recent investor announcements by the volume housebuilders have highlighted this very point.

“However, the impact of this has fallen on SME housebuilders most of all because the system has failed to consent enough sites below 100 dwellings and, because supply has been constrained overall, competition for those smaller sites has been very high, including from volume housebuilders with their stronger, cash rich balance sheets. The report highlights a 38% fall in the number of consented sites of fewer than 100 plots between 2017 and 2022.

“There are serious implications for the overall delivery of new homes and councils need to be planning for these lower sales rates now.”

Paul added: “At a time when the industry is contending with the impact of higher interest rates on demand and the withdrawal of Help to Buy, leading to slower sales rates per outlet, the industry will need more planning consents not less to deliver the volumes required by policy makers.  The Government should therefore be taking positive, affirmative and immediate action to amend planning policy to ensure that we build the new homes and affordable homes that this country desperately needs. The upcoming CMA Housebuilding Market Study should have at its heart the role of the planning and regulatory system on the structure of the UK industry. The industry is being made to suffer due to a constrained land supply through insufficient planning consents and increasing regulations all impacting at the same time, in particular on SME housebuilders.

“There is an acute housing crisis that weakens the economy and impacts on the life chances of young people and families. Yet the proposed changes to planning policy will alone result in around 77,000 fewer new homes per year being built in England, dropping to just half the Government’s 300,000 target, making a bad situation worse. Every report written on the housing market, such as those recently by the Centre for Cities, Centre for Policy Studies or Policy Exchange, highlights the desperate need to build more homes not less. If we are to genuinely Level-up we need to do everything necessary to ensure we build more homes and affordable homes, not less. We urge the Government to reconsider its current NPPF proposals and put housebuilding at the heart of its Levelling-up agenda so that it may play its role in the social and economic renewal of a post-Brexit Britain.”

The Conservative Party was elected in 2019 on a manifesto aspiration to build 300,000 homes per annum by the middle of this decade.  Yet after 13 years of Conservative led government only 39% of local planning authorities have an up-to-date local plan. Further research by the LPDF has found 47 councils have postponed that local plan process amid recent policy uncertainty. All are hoping that the proposed changes will allow them to plan for les