The number of starts on new build homes in England fell by more than half year-on-year in the final quarter of 2023, new government figures have shown.
According to data from the Department for Levelling Up, Housing and Communities (DLUHC), construction got underway on just 19.000 homes in the three months to December 2023. This marked a 51% drop compared to the same period in 2022.
As well as there being less construction taking place, there were 15% fewer homes delivered compared to the previous year, with 39,650 new build completions recorded.
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Over the year as a whole, 231,000 energy performance certificates (EPCs) were issued to new dwellings, an 8% annual fall. This statistic suggests the number of new homes on offer came in significantly below the 300,000 a year target set out in the 2019 Conservative manifesto - a pledge that has been watered down with the scrapping of mandatory targets for local authorities.
The Home Builders Federation (HBF), the trade body representing the UK’s domestic construction sector, said the figures had deepened the “gloomy climate” for prospective buyers. It has called on the government to “restore local housing targets” or risk “long-term consequences for the economy and society”.
House price indices from lenders, property listing websites and the ONS have all shown prices remain down year-on-year. This week, Nationwide saw an unexpected dip in seasonally adjusted prices, with commentators putting it down to a slight uplift in mortgage rates. It came after analysis published by Halifax suggested first-time buyers are continuing to be priced out of the market.
Mortgage rates remain significantly higher than they were in pre-Covid times, although they are beginning to fall. The Bank of England is widely expected to begin cutting its interest rate in the next few months off the back of falling inflation.
New build trends ‘on a par with 2008 recession’
According to the government data, starts on new builds hit a peak of almost 70,000 in the second quarter of 2023. But they then plummeted 71% over the next two quarters, meaning the number of new builds being started in Q4 2023 was only 15% above the 20-year low recorded at the start of the Covid pandemic in 2020.
Completions remain well above the 2020 trough, and are 18% below the peak recorded in 2021. The statistical note accompanying the release said the figures spoke of a “similar” trend in construction activity to what was seen ahead of the 2008 financial crisis. In the run up to the last significant recession, the number of starts plummeted, with activity taking around four years to level out.
Meanwhile, the number of housing units receiving planning permission also tumbled. It fell 20% year-on-year to 233,000 - the lowest annual figure since records began in 2016.
Over 2023 as a whole, the annual fall in starts was particularly pronounced in the South West and South East. They fell 23% and 20% respectively. London saw the biggest dip in completions, with the number falling 22% year-on-year.
HBF: ‘decline in new builds result of anti-growth policy’
Reacting to the figures, the HBF warned they painted a bleak picture for anyone looking to get onto, or move up, the housing ladder. Stewart Baseley, executive chairman at the trade body, said: “The sharp decline in housing supply is the inevitable result of several years of anti-growth policy and rhetoric. The politically driven weakening of the planning system will impact housing supply for years to come and needs to be urgently reversed.
“The social and economic implications of driving down housing delivery are deepening, with a generation unable to access decent housing and investment in jobs and communities all suffering. Putting short-term politics over the needs of the country will have long-term consequences for the economy and society.”
Basely pointed to the findings of a February report by the Competition and Markets Authority (CMA), which called for a “substantial” government intervention in the planning system and stated that a lack of housebuilding targets at local authority level was affecting the number of homes being produced.
He added: “Allied to the total lack of support for buyers in the Budget and the resultant impact on demand for new homes, it is an increasingly gloomy climate for industry and for a generation still clinging to the dream of home ownership. Removing the requirement for local housing needs assessments and allowing councils to ignore the housing needs of their areas has been shown by the CMA to significantly impact housing affordability moving forward.
“Rather than listening to the hysterical demands of anti-development backbenchers, ministers would be wise to consider the plight of aspiring homeowners and act on the recommendations of the CMA to restore local housing targets and address the long-term inefficiencies of the planning process.”
A DLUHC spokesperson said: "Housebuilding is a priority for this government. We are on track to meet our commitment to deliver one million homes over this Parliament and are taking significant steps to address the challenges to increasing housing supply through our long-term plan for housing.
“We’ve invested billions in housing to support bringing forward land for development, enabling the market to deliver the homes and infrastructure that communities need, and supporting local authority planning capacity.”
A better 2024 on the horizon?
While the 2023 figures painted a bleak picture, there have been indications from the industry that 2024 could be a better year for the construction of new homes.
One of the UK’s largest home builders, Bellway, has reported that it has seen an “improvement” in the number of reservations it has received so far this year. In the six weeks from 1 February, it said the number of private reservations had climbed more than 20% compared to the previous year, with the overall reduction in mortgage rates easing affordability.
Meanwhile, Oliver Knight, head of residential development research at Knight Frank, said cost inflation for the construction sector had moved “past its peak”. He said: “2024 should bring improvement. Interest rates are levelling off, build costs have already eased, land price declines have bottomed out, and demand from prospective purchasers is rising.”
However, he said the 2023 statistics “underscore the need for the next government to do more to accelerate the delivery of new homes”.
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