SME Housebuilders Forecast Lower Growth

SME Housebuilders Forecast Lower Growth
A majority of SME housebuilders have forecast lower growth due to the pandemic, a new survey by the Home Builders Federation (HBF) and Close Brothers Property Finance reveals.

Overall, 65pc of SME housebuilders have forecast subdued growth. 39pc of these predict business will fall by 10-50pc, while 26pc expect a reduction in the region of 0-10pc. The study also shows that 76pc of SMEs use the Help to Buy scheme on an average of 39pc of their new homes sales, according to the findings.

The existing Help to Buy scheme is due to be replaced with a new initiative in April 2021, which will be restricted to first-time buyers and include regionally based price caps ranging from £186,100 in the North East to £600,000 in London.

The research also highlights the fact that 73pc of respondents regard the lack of manpower in local authorities’ planning departments as a major curb on expanding their operations.

New regional caps too low

Kevin Marren, MD of Eccleston Homes, located in the North West, commented that currently, around 60-70pc of the company’s buyers use Help to Buy. Under the regional caps, however, the great majority of their properties (around 90pc) would exceed the new price banding of £224,400, which he considers extremely low.

At this maximum price, he pointed out, first-time buyer homes in the North West would of necessity be smaller and there would be less choice in the market. Mr Marren added that although the housing market currently looks positive, the company faces a double whammy next year when the stamp duty holiday ends and the regional caps are implemented.

In a further cause for concern, 83pc of participants stated planning delays and difficulty in obtaining planning permission will continue to present a significant obstacle to housing development over the next 12 months.

On a more positive note, a minority of SME housebuilders considered finance for development to be the least important barrier to growth, with 41pc agreeing it was not a problem.

However, SME developers reported varying degrees of difficulty in accessing the Government’s CBILS funding, according to the findings of the study. Some housebuilders, in their attempts to access financial support, have faced delays, inconsistent attitudes from lenders, and even downright refusal by some to lend to the construction sector.

And while just over half (53pc) of SMEs have tried to obtain support through CBILS, only 44pc had been successful.

SME housebuilders ‘lifeblood’ of regional property markets

Frank Pennal, CEO of Close Brothers Property Finance, commented that the threat to SME housebuilders in the wake of the Covid-19 pandemic is clear, and the industry has to act to reverse the decline of this crucially important sector of the housing market.

SME housebuilders, he said, not only provide training for young apprentices and learners, they are also the lifeblood of regional property markets, safeguarding diversity of design, construction skills and craftmanship within the industry. He added that this latest research emphasises the need to support and protect SME builders.

Stewart Baseley, executive chairman of the HBF, said it was vital to support SME builders so they can play their part in expanding the housing supply once the coronavirus has eased. Increased bureaucracy, he added, regulation and an uncompromising operating environment have resulted in the numbers of SME builders plunging in recent decades.

The Government, he believes, needs to work with the industry to develop policies that enable SMEs to grow, a strategy that would reap many benefits; increasing housing supply, creating jobs and stimulating regional economies across the UK.

In the longer term, he argues, finding ways to support households onto the housing ladder will be crucial. In addition, local authority commitment to maintaining five-year land supplies and granting planning permissions quickly and efficiently will be key to the industry’s ability to ramp up production to pre-coronavirus levels.

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