SME housebuilders' confidence deteriorated sharply since first quarter, survey shows

Confidence among small and medium-sized housebuilders has deteriorated sharply in the past three months, according to survey findings.

The second quarterly HBF and Quantum Development Finance sentiment survey shows builders’ expectations for land purchasing, housing starts and housing market conditions have all weakened since the previous findings published in March.

The survey found nearly half of SME developers expect to reduce land purchasing over the next three months, up from 27% in the first quarter. The percentage saying they expect to increase activity fell from 32% to 18% over the same period.

Expectations for housing starts have also weakened, with the percentage of buildings expecting a decrease in starts rising from 29% to 44%, with those expecting an increase correspondingly falling from 41% to 21%.

Almost all respondents (94%) said market conditions are “causing caution” when considering new site starts, up from 70% in March.

More than nine in 10 of SME home builders (93%) said the Iran conflict had made their business outlook for the next 12 months worse than expected, with just 1% disagreeing. More than a quarter of builders (26%) said that concerns arising from the conflict had led their business to reconsider or pause the acquisition of new development sites.

Neil Jefferson, chief executive at the HBF, said the decline in confidence “has significant implications for housing delivery and the sector’s ability to meet national housing targets”.

He added: ”While we welcome Government reforms to the planning system, if we are to increase housing supply broader interventions are urgently required. With a change in prime ministerial leadership on the horizon, there is a clear opportunity to reverse these concerning trends and unlock the full potential of smaller builders to help deliver the homes the country needs.”

The survey, produced by HBF in partnership with Quantum Development Finance, ran from 8 May until 22 May. A total of 110 SME developers participated. Firms entering “build anywhere from a handful of homes to around 500 per year.”