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Demand for new builds drops to six-year low

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Written by: John Fitzsimons
09/10/2019
Brexit uncertainty is putting off buyers from committing to a newly built home
Demand for new builds drops to six-year low

Buyer demand for new homes has fallen over the last year to the lowest level seen since 2013 with pessimism about the coming year, according to the latest house builders survey from the Federation of Master Builders (FMB).

Encouragingly access to development finance appears to be improving, but there is still a sizeable way to go.

The FMB surveys small and medium sized housebuilders across England with respondents were asked to rank current buyer demand out of five.

In its latest survey the average score dropped to 2.9 from 3.14 last year with builders being gloomy about their future prospects too, as predictions for demand next year fell further to 2.75.

When asked what they attributed this fall in demand to, almost half of small builders pointed to a lack of confidence among buyers.

Brian Berry, chief executive of the FMB, said small builders were seeing the effects of Brexit uncertainty, with prospective homeowners putting off buying until they have a greater idea of what lies ahead.

He continued: “Hopefully this is just a short-term pause, and that post-Brexit, demand will pick up once again. If not, and we enter a downturn period, the government will need to consider how best to support SME house builders to avoid many firms leaving the sector.”

Development finance improving

Builders were also asked about access to development finance, and while the average score of 2.15 out of five is far from encouraging, it is the highest score seen in recent years.

Last year for example builders offered an average score of 2.02, while back in 2013 it came to just 0.95 out of five.

Nonetheless, lack of finance was the third biggest constraint cited by builders in terms of what is limiting their ability to build more homes, behind only access to land and the planning system.

Berry continued: “This is the fifth consecutive year that small house builders have cited lack of access to available and viable land as the number one barrier. Small sites are the bread and butter of SME development, but unfortunately local authorities’ Local Plans are still far too focused on large sites.”

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