New-build completions hampered by rising costs

Limited supply is prompting more buyers to consider new-builds but the sector is also suffering from a stock shortage, Savills warns.

Research by the agent has found that limited choice across the housing market, especially for larger second-hand properties, has prompted many buyers to consider new build for the first time.

However, the combination of limited construction materials and slow planning decisions means supply of new homes is declining.

Its analysis found completions have been declining for the past three consecutive quarters, with only 238,500 new homes being built in the year to the first quarter of 2022 – a 7% decrease on the peak of 255,000 at the same time in 2020. 

George Cardale, head of residential development sales at Savills, said: “Bricks, cement and roofing products have all become increasingly difficult for housebuilders to source, as well as being more expensive to produce, due to the rising cost of energy.  

“Not only is it increasingly costly for developers to build, but a fall in the number of consents granted since the peak of 2019 is creating intense competition for sites to build on.

“Meanwhile, across the UK, we are seeing an imbalance of buyer demand and the availability of new homes. There are people ready and waiting that are keen to move into their next home but stock continues to be an issue.”

The agent also explored how energy efficient new-builds are compared with secondhand homes.

Between 2018 – 2020, the majority of new builds transacted achieved a grade B on their energy performance certificates compared with a D for a second-hand detached, semi-detached or terraced property and C for a flat, according to the research.

Projected annual ‘core’ energy bills of new build vs second hand by the end of 2022

**Combined estimated cost of lighting, heating and hot water from EPCs on homes transacted between 2018-20, inflated by projected rises in energy bills; Source - Savills research using EPCs and HM Land Registry

Savills looked at energy bill savings for the same property type and found that those buying new build houses would be looking at potential bill savings of more than 50% when compared with second hand homes.

Sophie Tonge, research analyst at Savills, said: “Developers who make the extra effort to go beyond the minimum requirements are likely to better future-proof their developments and entice a larger pool of buyers who are increasingly motivated by cleaner and cheaper ways of living.”