Majority of housebuilders say supply issues hit bottom line
Almost two-thirds of housebuilders say supply chain issues are now hitting their bottom line, with scarcity of materials driving record costs.
Some 61% of 50 companies surveyed by Knight Frank said it was the biggest challenge to their balance sheets.
The cost of building materials is estimated to have risen by 24% over a year. While over half of housebuilders said house price inflation has allowed them to manage this rising cost, the majority have still taken a profit hit.
Almost two-thirds of housebuilders say supply chain issues are now hitting their bottom line, with scarcity of materials driving record costs.
Some 61% of 50 companies surveyed by Knight Frank said it was the biggest challenge to their balance sheets.
The cost of building materials is estimated to have risen by 24% over a year. While over half of housebuilders said house price inflation has allowed them to manage this rising cost, the majority have still taken a profit hit.
The problem is more pronounced for volume housebuilders, of which 70% said it was the biggest pressure, compared to 44% of SME builders.
This was followed by land prices, which was the biggest bottom line challenge for 22% of respondents, with effects felt more by SMEs (33%) than volume housebuilders (18%).
Knight Frank’s quarterly land index report found planning delays to be the largest overall challenge for 25% of housebuilders, followed by availability of land for 21%.
Going into the last quarter of the year, availability of land was identified as the biggest challenge for one in five.
High demand for greenfield land has seen prices rise 14.7% over the past year, with a 5.5% uptick in the last three months alone. In contrast, urban brownfield land rose 3% over the last year, lifted by a 2.5% bump in the last quarter. Prime central London land values were flat over the year.
As a result, Knight Frank said many volume housebuilders are now looking at smaller sites, in some cases dipping to sub-50-homes sites.
Justin Gaze, head of residential land at Knight Frank, said: “Build cost inflation is the most talked about topic in the land market at the moment, and it is anticipated that this will not ease in the short term.
“This, combined with delays in the planning system, is going to significantly impact the delivery of completed new homes in the market.”
Anna Ward, senior research analyst at Knight Frank added: “In many cases, UK housebuilders are managing the rise in build costs due to house price inflation in sought after areas… However, if build costs do not settle down at a time of cooling house price growth and rate hikes, this will have a knock-on effect on land prices.”
To send feedback, e-mail emma.rosser@eg.co.uk or tweet @EmmaARosser or @EGPropertyNews
Photo: Anthony Harvey/Shutterstock
