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Property Developers Grapple Soaring Costs and Labour Shortages

UK housebuilders are facing a perfect storm of rising costs and labour shortages, threatening the profitability of new developments.

A new report by construction platform PlanRadar reveals that a staggering 78% of UK housebuilders are battling soaring building costs. The study, published in PlanRadar’s eBook, Global Housebuilders’ Survey 2024, surveyed 669 companies across 17 countries, painting a stark picture of the challenges facing the industry.

Labour Shortages Bite

The construction industry is grappling with a severe skills shortage, driving up labour costs and delaying projects. Almost two-thirds (65%) of housebuilders report facing wage increases, while a massive 75% are experiencing project delays, squeezing already tight margins.

Call for Immigration Reform

UK housebuilders are calling for action to address the labour crisis. The PlanRadar survey found that 68% of UK housebuilders support a review of immigration policies to attract skilled workers from overseas. In addition, 57% are urging the government to reduce regulatory barriers to boost housing supply.

Technology Holds the Key

Amid these challenges, technology is emerging as a potential solution. Driven in part by the digitalisation push of the Building Safety Act, 79% of UK housebuilders believe that technology can enhance efficiency and profitability.

Rob Norton, UK director of PlanRadar, commented: “Rising prices and labour costs are squeezing housebuilders worldwide, and the UK is feeling the pressure. With tighter regulations and shrinking profit margins, the message is clear: adapt or fall behind. These findings are a glaring litmus test for how the UK market is faring, and while challenging, there is hope. It’s time for the industry to innovate and thrive.”

A Global Challenge

The pressures facing UK housebuilders are part of a wider global trend, as highlighted by PlanRadar’s co-founder and chief executive, Sander van der Rijdt: “Rising costs and labour shortages are shaking the very foundation of the housebuilding industry, just as global demand for homes has reached critical levels.”

Time to Adapt

Despite the challenges, the report also reveals a sense of optimism within the industry. With interest rates expected to decline, now is the time for housebuilders to adapt and prepare for the upturn.

“Amid a period of high interest rates and reduced demand, companies now have a unique opportunity to pause and focus on optimising their internal processes. This preparation is crucial as interest rates begin to decline, spurred by recent cuts from the ECB and FED, which are already signalling an uptick in demand,” added van der Rijdt.


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