Surveyors reported their gloomiest assessment of UK housebuilding since the start of the covid pandemic, with a sharp increase in the number of surveyors reporting that workloads are in decline.

The latest UK Construction Monitor report reveals that a net balance of -10% of surveyors reported a decrease in activity in the third quarter of the year.

This is a significant fall on the -1% reported for the previous quarter and is the most downbeat result since the covid outbreak in March 2020.

The slowdown in construction activity has been driven by interest rate rises, which have increased the cost of borrowing, hitting builders and dampening demand for housing, according to analysts.

RICS attributed the drop to “the challenges currently being encountered by housebuilders in the face of slower sales and tougher pricing”.

The score was similar to the minus 27 registered at the start of the Covid-19 pandemic in the second quarter of 2020, when the construction sector was largely shut. It was the second lowest reading since the 2009 financial crisis.

Surveyors’ outlook for the year ahead was downbeat. The construction sector, which accounts for about 7% of the economy and employs more than 2mn people, will continue to contract after output fell in July and August, the index suggested.

The fall in housebuilding drove the workload index for the whole construction sector to a net balance of minus 10, its lowest since the early months of Covid-19, when it plunged to minus 36.

The shortage of housing stock is further stretching the affordability of homes.

“The tougher environment around the housing market is now coming through in terms of a slowing in the buildout rate of new developments,” said RICS chief economist Simon Rubinsohn.

“Housing supply is likely to fall at least for the next year compounding the problems already being faced by many of those looking to get a first step on the property ladder or move into the rental market,” he added.