House building up in 2022 despite challenges

New homes data released by the National House Building Council (NHBC) reveals 2022 saw the highest number of new home registrations since 2007 (191,801 in 2022 vs. 198,467 in 2007).

Within that, the final quarter of the year saw a 21% drop in new home registrations compared to the previous quarter (35,041 in Q4 vs. 44,542 in Q3) as the impact of September’s mini budget and wider economic challenges took hold.

In Q4, 10 out of 12 UK regions experienced a decline in new home registrations with volumes down significantly compared to the previous quarter. London was worst affected with a 63% decline, followed by the North East at -47% and Wales, the North West and Merseyside joint third at -33%.

Steve Wood, CEO at NHBC, said the data reflects the fluctuating economic climate: “Whilst the final quarter of 2022 was undoubtedly a challenging one, it was off the back of strong market performance in the first half of the year.

“Rising interest rates and the cost-of-living crisis have had a marked impact on many areas of the UK economy. House building has not been immune from these factors but the demand for high quality new homes, whether in the private or rental sector, is still holding up. It is too early to judge how long any slowdown is likely to last, house building continues to show resilience. The sector has shown time and time again that it can weather market fluctuations and respond to rising demand.” He added, “we are seeing some early indications that enquiries for new build homes are easing up, which is perhaps a sign that people need to get on with their lives.”

The data released by the UK’s leading independent provider of warranty and insurance for new homes is widely recognised as a lead indicator of house building activity.

In Q4, private sector registrations were most affected with a decline of 28% (23,203 homes in Q4 2022 vs 32,293 in Q3 2022). New home registrations in the rental sector were less affected, down by only 3% (11,838 homes registered in Q4 2022 vs 12,249 in Q3 2022), as Housing Associations report increased demand for affordable homes amidst the cost-of-living crisis and the Build to Rent sector is still seeing significant levels of investment.

David Campbell, Commercial Director at NHBC, commented that the rental sector had been holding up well.

“House building in the rental sector has remained steady in the last two quarters, with investors and developers pivoting towards the increasing demand for high-quality rental homes. The diversity of the house-building market and greater focus on Build to Rent is proving to be an important factor in housing supply,” he said.

Mr Campbell reflected that while the first quarter of 2023 is likely to be a challenging time for the house-building market, there is some cause for cautious optimism.

“Builders and developers have historically held up well in tough economic circumstances, in part bolstered by the imbalance between demand and supply of new homes. As one might expect, many are considering the viability of launching new projects to the market very carefully, particularly in light of the latest Bank of England base rate rise, but there are signs that this will be temporary as enquiry and reservation levels begin to rise.” he said.