Housebuilders in the UK have faced significant headwinds, primarily due to the surging costs of construction materials and labour. This has led to a stagnation in the number of new homes being built, a situation that many did not anticipate but are now grappling with.
According to recent research conducted by APRAO, a specialist in property development, the cost of building materials has soared by an average of 33.2% compared to the pre-pandemic era. This rise has made the task of producing homes at a previously seen pace a financial tightrope walk for developers. The most significant price hikes have been observed in insulating materials, which are up by 61.4%, pre-cast concrete products, up by 55.8%, and plastic doors and windows, which have seen a 49.6% increase.
Daniel Norman, the chief executive of APRAO, said, “The pandemic threw a curveball at the nation’s housebuilders, with restrictions on producing and importing building materials causing a spike in costs. Even though the pandemic is in our rearview mirror, the cost of many materials remains stubbornly high, adding to the financial pressures faced by developers.”
These pressures aren’t just limited to materials. Higher interest rates and increased labour costs are also contributing factors. The stark reality is that these compounded costs are putting a damper on the ability to deliver housing, with the annual number of new homes staying relatively flat since the pandemic.
A Mixed Bag of Costs
While the overall trend in material costs is upwards, not all materials have followed this trajectory. Items such as timber and aggregates have actually seen a decrease in cost over the last year. However, this silver lining is thin, given the widespread increases in other areas like flexible pipes and fittings, metal doors and windows, and ready-mixed concrete.
Labor costs are also on the rise, with figures from Hudson Contracts showing that 11 out of 12 key trades have seen their average weekly pay increase over the last year. Scaffolders top this list with a significant pay rise of 16.3%.
The Impact on Housing Delivery
This financial year has seen a meager average annual growth rate of 0.3% in the number of new homes entering the market across England, a stark illustration of the challenges faced. Interestingly, the East Midlands and East of England have somewhat bucked the trend, witnessing average annual increases of 5.7% and 5.1%, respectively, in the number of new homes. The North East and South West have also seen modest increases.
However, not all regions have fared well. The North West, London, and Yorkshire and the Humber have seen reductions in the number of new homes delivered, with the North West experiencing the most significant decline at an average annual rate of -3.1%.
Conclusion
The situation presents a complex challenge for housebuilders, policymakers, and prospective homeowners alike. While the resilience of housebuilders in maintaining a consistent level of housing delivery amid rising costs is commendable, the need for innovative solutions to tackle these financial hurdles is more urgent than ever.