Global property consultancy Knight Frank has published its quarterly UK housebuilder survey and land index.
Canvassing 50 volume and SME housebuilders across the country, the survey provides a snapshot of industry sentiment and should be of interest to residential estate agents.
In Knight Frank’s latest survey, supply shortages and material costs, taken together, (and which were reported as the number one challenge for housebuilders and developers in the Q1 2022 survey), remained top of the agenda for respondents this quarter.
However, more respondents (30%) say they are their top challenge in Q2 compared to 28% who said it was the key challenge in Q1.
Land availability remains another important issue for respondents. 86% said available land market supply was either limited (50%) or very limited (36%). Only 14% said the availability of land was adequate.
Planning remained the second biggest challenge for respondents – unchanged since Q1.
Planning difficulties are creating fierce competition in the market; 74% of those surveyed said that they were ideally looking for land that already has planning granted.
Labour costs and skills shortages remained the fourth biggest challenge, although the number of survey respondents who reported it fell from 15% to 9% between Q1 and Q2 – a drop of 40%.
Responses suggest housebuilders are becoming increasingly concerned by the UK’s cost of living crisis, despite currently experiencing robust sales of new homes.
Around 9 in 10 said that it was having an impact on buyer sentiment, with 44% reporting ‘slight’ impact, 41% reporting ‘moderate’ impact and 7% reporting ‘significant’ impact. Only 7% of respondents said the cost of living crisis was having no material impact on buyer sentiment.
With ‘Help to Buy’ coming to an end in October 2022, respondents were asked what will help boost sales after the scheme closes to new applicants.
Of those surveyed, 27% said the Deposit Unlock scheme will help most, with a further 21% suggesting housebuilder incentives will provide the biggest boost and 17% proposing sales to the Build to Rent (BTR) sector will give the most support.
Justin Gaze, Head of Residential Development Land at Knight Frank said: “New residential development is being constrained by a limited supply of land coming through the planning system. In this environment, signs are already emerging that housing delivery rates could slow considerably.”
Indeed, looking ahead to Q3, 37% of respondents said start volumes would decrease this year, while only 19% thought they would increase (the remainder of respondents believe start volumes will not change). When asked about land prices, 37% said this would increase, 52% said it would stay the same and only 11% thought it would decrease.
Q2 Land Index
Average land prices in Prime Central London (PCL) rose 2.5% on annual basis in Q2 2022, but remained unchanged compared to Q1 2022. Last quarter, land values in PCL rose for the first time since autumn 2020, boosted by a stronger PCL sales market and increased international demand.
Brownfield land prices were down -1.1% in Q2 2022, but up 1.9% year on year compared to Q2 2021. There has been a slight uptick in demand for urban flatted schemes as commuters have returned to the office post-pandemic.
Greenfield land prices were unchanged between Q1 and Q2 2022, however annually values increase 13.9%.
David Chapman, a Senior Research Analyst at Knight Frank, commented:
“Development land shortages across the country are supporting prices, but the market is expected to come under pressure later this year as house price inflation moderates and high build costs put further pressure on margins. This is a particular concern in urban areas where house price growth has been generally been lower.”