House building drops by a third with constructors blaming local authorities for delaying the projects more than the pandemic does.
The latest news states that builders will deliver fewer new constructions by the end of the year amid the COVID-19 pandemic and escalating tensions between the local authorities and contractors.
With only a few weeks of this year to go, UK’s seven largest house constructors have revealed that construction completions are down, with 35% fewer properties built compared to the previous year. And it may sound like seven construction companies don’t account much of the British housing supply market, but they manage over 40% of all projects. And they’re not the only ones to warn that housing completion is down in 2020, many small and medium-sized construction companies report they registered high drops in the number of projects they handle.
Is the pandemic the only to blame for the drop in the number of completed constructions?
Even if the authorities would like to blame only the COVID-19 pandemic for the lower number of new houses built in 2020, most constructors point their fingers towards the local governments. The effects of the lockdown have affected contractors’ ability to deliver new properties. Still, local authorities have also delayed in providing builders with planning permissions, so the blame is split between the two factors.
The Home Builders Federation and Close Brothers Property Finance have conducted a survey that concluded that 83% of developers think that discharge of planning conditions and planning permission delays by governments hold off new house delivery over the following year.
The pandemic forced institutions to limit the number of workers that attend office hours, and therefore local authorities have dealt with a lack of resource. 73% of constructors have reported lower output forecasts because there were no workers to handle their projects and approve or deny their applications. Surprisingly, only 44% of home developers blame the worldwide pandemic for the delay of home delivery.
Early in 2020, the Government consulted with local authorities and home developers on a new strategy to improve the system and provide the means to construct a million new houses by 2025. Sadly, the proposal failed to pass, and local government associations stated that the new planning system would only act as a barrier in the process. This time, similar to many other ones, they preferred to point their finger at builders that presumably hoard land. The representatives of the local government associations state that with 9 in 10 projects approved by local authorities, and over a million constructions given planning permission, but not yet brought about, it’s easy to understand who is delaying the process.
What should British residents expect to happen in 2021?
Because of the delay in delivery, for the housing market to recover, 2021 must be the year of build, build, build to offer people the homes they need and the real estate market the economic benefits it lost during 2020. Because construction companies couldn’t complete most of their projects, many of their employees lost their jobs, and it’s expected in 2021 to bring them back.
In December 2019, the Government stated that they intend to facilitate the construction of 300,000 houses annually. But the latest reports from the Ministry of Housing, Communities and Local Government for England show that the first quarter of 2020 brought only 15,930 buildings before the COVID-19 lockdown was enforced. As expected, new housing starts and completions have collapsed once the pandemic started in the spring, and the finalisation rate dropped with 15% compared to the previous spring.
Builders, real estate agents, suppliers like Titan Concrete, and buyers hope 2021 to reverse this decline. Local authorities need to search for ways to remove the barriers Coronavirus put on all industries and redress the balance in the real estate sector.
Some experts predict that the residential construction industry can recover quickly if the local authorities provide them with the needed framework. They expect the biggest names in the building sector to hurt at present given the restrictions they need to respect, but their pipelines are robust because they’ve been earning millions in profits before the virus forced the planet to go into lockdown. All reputable companies should be fine even if their sales dropped this year.
Jennet Siebrits, head of residential research at CBRE states that she expects the real estate market to recover after the crisis, but the timing of the decline cannot be predicted because it depends on the global economy. Even in the given context, with the UK under fire from Coronavirus, the supply of properties is lower than the demand.
Everyone is optimistic about the recovery of the market once they get out of lockdown and social distancing because the demand has been strong for a long time and the number of approved projects has increased considerably since 2019.
But because of the delays in projects, more buyers will fight over a lower number of properties, and when the demand grows, it’s natural for the price to go in the same direction. And with banks keeping their mortgage rates low, there’s no reason for builders not to ask pricier rates.
But, while significant construction companies will probably see a rapid return to work, small and medium ventures won’t be as lucky. They lacked the resources to cover expenses without producing income and had a tough time to face the effects of the pandemic. The lockdown stalled the purchase of completed buildings and prevented suppliers from delivering materials on time. One-third of them have their new houses standing empty because many buyers pulled out. It’s an impossible situation for some, especially as they cannot access government-backed loans and therefore have no money to support their recovery.
With around 70% of companies stopping 90% of their activities due to safe working requirements, supply chain problems, and cash flow issues, many people ask how they’ll manage to go to the wall.
Everyone expects to see the real estate market bounce back in 2021, but its recovery depends on the evolution of the pandemic.
© MKFM News 2020
