New housebuilding to contract amid rising funding rates

11-10-2022

Housebuilding is set to contract fall next year alongside contracting prices, according to Capital Economics.

The research consultancy said UK housing starts were likely to fall from a predicted 178,000 homes this year to just 110,000 next year. They would then recover to 130,000 in 2024.

This could be against the cost of ‘real’ house prices falling by 13.6% in 2023.

Funding costs are likely to rise for builders over the coming months, in line with rising Bank of England interest rates.

Indeed, Paul Hackett, chief executive of housing association Optivo told Housing Today: “The change [in borrowing rates] has really affected scheme viability. Now we’ve got to review all our schemes on a scheme by scheme basis to see what we can do.

“This is an issue affecting the whole sector. There’ll be a direct impact on housing starts – even if it’s only a temporary blip.”

According to Capital Economics completions will drop more slowly, from 187,000 in 2022 to 160,000 in 2023 and finally 140,000 in both 2023 and 2024.

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