market:

With his experience as a Managing Director at Lloyds Banking Group and Chief Executive Officer for Homes England, Gordon More has seen pretty much everything in housing.

He is now strategic advisor and investment committee chair at LDS, senior adviser at JLL, and non-executive director at Sigma Capital, Allison Homes and Kingswood Homes. We caught up with Gordon to get his thoughts on how SME housebuilding looks in early summer 2023.

It has been a topsy-turvy time for housebuilding, with the sector going from a ‘hot’ selling market last year, and production struggling to keep up, to a sudden halt following the infamous Kwasi Kwarteng mini-budget in the autumn.

Literally, the market stopped— and it was only in late March that sales have stabilised, albeit at a significantly lower rate than the previous year. So, for housebuilders, and SMEs in particular, what might the coming months bring? Here are some factors everyone should be aware of.

1. Consultation delaying planning decisions and Local Plans

The recent climb down by government in the Levelling-up and Regeneration Bill, with the intention of removing centrally imposed building targets and including more local decision-making, is already slowing down the planning process. Indeed, a number of local authorities have declared that work on their Local Plans is being paused.

This is delaying existing permissions in the planning system and reducing certainty. At a time when housebuilders are tentatively recommencing land purchases, this is another barrier they are facing. This, added to the fact that there are large areas of the country where building is halted as the government struggles to come up with a solution to nutrients in rivers, is keeping land prices high.

2. Uncertainty in the sales market

While enquiries and visits to sites have improved over recent weeks, sales are running at around 0.55 sales per site, per week (according to figures published by the Home Builders Federation), significantly down on the last 18 months and below the long-term, pre-pandemic average.

Uncertainties over the cost of living, interest and mortgage rates, and inflation (which is still affecting material costs) makes predicting the market in the short- those smaller housebuilders that rely on raising development finance. This will only strengthen the attractiveness of the LDS Sales Guarantee to support new lending.

4. Adoption of new government regulations on building performance and energy efficiency

Finally, building regulations are evolving at pace, the latest being Part L, which covers the conservation of fuel and power in the building of new homes and establishes how energy-efficient they should be.

From 15th June 2023 all homes that have not commenced by that date will be subject to the new regulations, which require improvements in lighting efficiency and new low-flow temperatures for heating systems, amongst other requirements. All new homes must produce 30% less carbon emissions, a figure that will be increased in due course as the Future Homes Standard comes further into play.

term challenging, all of this is are being factored into appraisals. More bulk and partnership/pre-sold deals are emerging as housebuilders manage this uncertainty. I suspect this will continue in the shortterm until there is more confidence in buyer demand.

3. Are banks and other financial institutions ‘de-risking’?

Fortunately, there is still little evidence that banks and financial institutions have tightened lending criteria for development lending—although experience tells me that this will happen. The recent banking crisis (with Credit Suisse and US regional banks) will have put credit departments on notice. In any event, with the base rate at 4.5% (and potential for another increase likely) the overall cost of funding is higher and there is a strong probability that increased pre-sales will be a condition attached to lending offers for

So, what does this mean? Different materials, heating sources and increased evidence and testing will be required. For the major housebuilders, with large technical departments and the ability to test and source different solutions, that’s not such an issue. The smaller SME, however, with less in-house capability, requires the support of the wider building community to ensure that they are prepared to meet this challenge.

In the short-term, compliance is likely going to increase cost, which may be difficult to reflect in sales prices and put already squeezed margins under yet more pressure.

To summarise, I foresee a challenging environment until at least late summer, and potentially into next year—and I am by nature an optimist.

If you would like to be put in touch with Gordon, please contact us at boost@LDSyoursite.com