THE UK is set for a historic level of decline in housebuilding this year, a new report from Knight Frank warns.
Covid-19 and the subsequent lockdown will result in a 35 per cent drop in the number of homes built this year to 104,000, according to the property consultancy.
It predicts that private housing delivery in 2020 will be lower than in the years following the global financial crisis.
In London, Knight Frank expects 8,000 fewer homes to be built – with private housing delivery the lowest since 2014.
Last week marked the start of some housebuilders setting out their strategies for a phased return to site construction and operating, albeit with strict social distancing protocols. However, Knight Frank noted that “this is not simply a case of flicking a switch back on.”
“Faced with supply chain challenges and a national material shortage, developers are under increasing pressure to adhere to tight social distancing controls, while also coping with an ever dwindling availability of skilled workers,” said Justin Gaze, head of residential development land at Knight Frank.
“This has cast a dark cloud over the capacity for housebuilders to deliver at scale and speed.”
Peer-to-peer property development lenders have predicted that the market will take around 12 months to recover and have urged the government to utilise the alternative finance sector to boost housebuilding at this challenging time.
“In terms of residential construction, we already know that there is a huge shortage of housing in the UK and we are nowhere near the 300,000 annual units that all governments over the past decade have targeted,” said Roxana Mohammadian-Molina, chief strategy officer at Blend Network.
“So, we will be even further behind those targets and I think that once the dust settles, the government will need to think seriously about something that we (and others in the P2P space) have been saying for a while: that governments need to think of alternative finance to be able to fund all the houses this country needs.
“Given the scale of the housing issue, we need to access as broad a pool of capital as possible and we should think of new ways in which fast-growing alternative finance and private investment can be committed to support accessible housing developments.”
Arya Taware, founder and chief executive of FutureBricks, said that her P2P platform has continued to provide finance to small- and medium-sized housebuilders while many competitors have stopped.
“We are seeing an influx of borrowers come to us with loan applications as many of their existing lenders have paused and left them in the lurch,” she said. “I think, as a responsible lender, it’s important to not create panic in the market and keep things in perspective. Lending to small- and medium-sized enterprise property development projects is asset-backed – arguably the best form of lending and investment that is out there as it is bricks and mortar!”
She said that FutureBricks has not made any drastic changes to its lending criteria as it was already risk adjusted and underlined the important of keeping liquidity flowing in the market.
She also called on the government to deploy capital more quickly through P2P platforms, through schemes such as the ENABLE Build programme.
“Now more than ever it’s important to be agile, to act quickly and to save as much of our economy as possible. The construction industry not only builds homes, but it also generates one of the highest employment rates in the country so it will have other socio-economic ripple effects.”
Andrew Turnbull, co-founder of alternative property finance provider Wellesley, said that the Knight Frank report highlights some of the concerns that they have already considered regarding new building projects.
“With many of the UK’s schemes currently under construction being delayed either due to main contractors leaving the site over health and safety requirements or as a result of supply chain difficulties, it means that there will be fewer contractors able to start on new projects until at least the backlog of building and material procurement is worked through,” he added. “Similarly, with most lenders cautiously paring back the terms they are willing to lend combined with a wholesale uncertainty of future housing prices over the coming year, the risk of starting a new project will become less compelling to developers who have land awaiting development.”