UK housebuilders optimistic about future growth plans

Housebuilders expect to see growth and investment in the sector despite uncertainty over the direction of the industry following the vote to leave the European Union.

The second annual Lloyds Bank Commercial Banking report on the UK housebuilding sector found that the sector is confident despite the challenges posed by the UK planning system, Brexit and a skills shortage in the construction sector.

Overall, firms’ surveyed said they were more optimistic about the future of the housebuilding industry, up from 7.1 to 7.2, with 10 representing the highest level of expectation.

36% said that uncertainty over post-Brexit policy is the biggest challenge they face, but overall the industry is quite optimistic and plans to grow, invest and create jobs. 42% of housebuilders reported that their growth forecasts had improved since the EU vote, compared to 27% who said growth forecasts had declined.

Overall, the housebuilders report average growth of 28% over the next five years, compared to 25% last year. The report also found that average five-year investment plans were increasing by 17% year-on-year.

Legal & General Housing Partnerships director Stephen Smith says: “This report from Lloyds provides an important contribution to the ongoing housing debate. On the whole, it shows that optimism within the housing industry remains strong despite wider market uncertainty.

House builders remain positive about the growth potential in the sector, and the CML’s latest lending trends highlight that many buyers were able to move onto or up the property ladder this year, helped by low interest rates and government initiatives like the Help to Buy scheme.”

However, 30% of respondents cited the skills shortage as one of the biggest challenges the industry faces and highlighted the difficulties in recruiting skilled workers like bricklayers, electricians, plumbers and joiners.

Companies also reported other potential problems. 32% said that the availability of government support and 29% cited the lack of suitable land as factors that impacted their ability to meet housing targets.

Stephen Smith continued: “A growing skills gap in the industry will undoubtedly contribute to the ongoing supply side deficit that has been plaguing the UK. Despite the government’s target of building 300,000 new homes in 2015, only half that number were realised.

With house prices rising in part as a consequence of this shortfall, negatively impacting affordability, recent figures have revealed that next year property rentals are set to outstrip sales for the first time since the 1930s. The UK’s chronic housing shortage therefore remains a pressing and very real issue.

“During the Prime Minister’s first 100 days in office, we have been promised a ‘radical’ approach to housing, so there is at least a political recognition of the need to build more affordable homes.”

Pete Flockhart, head of housebuilders, commercial banking, Lloyds Bank, said: “Given the challenges that housebuilders face, the sector is painting a relatively optimistic picture, with improved growth and investment forecasts compared with last year’s survey.

“The wider uncertainty, coupled with the rising cost of materials, presents some challenges but the industry is taking steps to tackle these issues head on, and still plans to grow.”