According to a survey by Shawbrook, house prices have become the main concern for property developers in the last three months.
As well as other factors, the research showed this was affecting how and where new homes are being built across the country.
The poll found that 23% of developers said house price growth was their main concern, closely followed by the 22% who said the challenge of obtaining planning permission was a worry.
A further 21% cited concerns about the cost-of-living pressures on buyers, 21% pointed to sustainability and a fifth mentioned difficulties in accessing skilled labour.
High mortgage rates posed a challenge, as said by 19% of developers, while 18% mentioned rising material costs and a further 18% said limited support for first-time buyers.
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Rethinking development strategies
This has resulted in developers amending their business plans, with the most common adjustment being to change the kind of property being built, as cited by 35% of respondents.
A third were re-thinking their geographical focus, while 30% were prepared for significant increases in operating expenses.
Some 27% were looking at different construction methods or materials, 27% were delaying the start of new projects and a quarter said they might have to stop trading and exit the market completely.
Of the 30% of respondents who believe costs will rise in the next 12 months, a third expect increases between 21% and 30%, 27% predict this will be between 31% and 40%, and 16% said there could be a 41-50% rise in costs. Some 12% forecast expenses to rise by 51-60%.
Agility in a challenging market
Terry Woodley, managing director of development finance at Shawbrook, said: “Our research highlights the challenges currently confronting developers and the wider housebuilding industry in general.
“Rising costs, planning hurdles and market uncertainty have created a perfect storm, which has been exacerbated by fluctuating house prices. However, despite the headwinds of the past 12 months, there’s still plenty of reason for optimism. Recent government announcements, such as the Planning & Infrastructure Bill, could help cut red tape and accelerate progress, paving the way for increased housebuilding. Despite challenges, developers have shown remarkable agility, adapting their strategies to remain robust and profitable in a tough environment.”
He added: “One thing is clear: to overcome current barriers and make real inroads towards the government’s housebuilding targets, a collaborative, multi-pronged approach is essential.”
