Fall in Housebuilding Exasperated by Wet Weather and Costly Mortgages
The number of new homes registered in the first three months of 2024 down by a fifth.
The construction sector in the UK has experienced a significant decline in housebuilding activity, driven by mortgage market pressures and adverse weather conditions. According to new figures released by the National House Building Council (NHBC), the number of new homes registered for construction in the first quarter of the year fell by 20% year-on-year, reaching a total of 21,967.
The completion rate for new homes also saw a downturn, with a 13% drop to 26,240 units compared to the same period last year. Steve Wood, CEO of the NHBC, attributed this decline to higher mortgage costs and challenging economic conditions.
Mortgage costs have surged over the past two years due to the Bank of England's series of interest rate hikes aimed at curbing inflation. This increase in borrowing costs has discouraged new home purchases and slowed house price growth.
In addition to economic pressures, the construction sector was also hindered by the eighth wettest winter on record. The Met Office reported that southern England experienced its wettest February since 1836, with many areas receiving more than double the average rainfall. This prolonged wet weather has further disrupted housebuilding activities.
The decline in new home registrations was widespread, affecting nine out of twelve regions in the UK. The East Midlands and Wales suffered the most significant drops, both experiencing a 43% decrease in registrations compared to the previous year. Other regions with notable declines included North West and Merseyside, which saw a 41% reduction. In contrast, London, Scotland, and Northern Ireland and Isle of Man reported increases of 2%, 4%, and 23%, respectively.
Private sector registrations decreased by 21%, with a total of 13,633 new homes registered in Q1 2024. The rental and affordable housing sector also faced a decline, with registrations down 19% to 8,334 units.
Despite the overall decline, there are signs of cautious optimism. The NHBC reported a month-on-month increase in new home registrations throughout the first quarter, suggesting a potential recovery. March saw 8,320 new homes registered, up from 6,557 in January and 7,090 in February. Additionally, Q1 2024 registrations were higher than those in Q3 and Q4 of 2023.
Steve Wood commented on these trends, noting the positive momentum despite ongoing challenges. "House builders are cautiously optimistic, and it is encouraging to see signs of growth, with a month-on-month increase in registrations since January," he said. However, Wood also highlighted the need for addressing issues within the planning system and the national skills gap, which requires nearly 225,000 additional workers by 2027 to meet construction demands.
The NHBC's Q1 2024 figures reflect the complex interplay of economic pressures, weather challenges, and sector-specific issues impacting the UK housebuilding market. While the decline in registrations and completions underscores the difficulties faced by the industry, the tentative signs of recovery and potential future incentives offer a glimmer of hope for a rebound in the latter half of the year.
