Nearly all UK property developers have changed their business plans over the past three months due to uncertainty around house prices, research from Shawbrook found.
Developers said house price growth was their biggest worry, with 23% putting it top of their list.
The next main concerns were getting planning permission (22%), cost-of-living pressures on buyers (21%), sustainability and ESG rules (21%), and finding skilled workers (20%).
High mortgage rates (19%), rising material costs (18%) and lack of Government support for first-time buyers (18%) were close behind.
Because of these issues, 99% of developers have made changes to how they work.
Over a third (35%) said they have changed the type of properties they build, showing a move to different sizes or types of homes.
A third (33%) are rethinking where they build, while 30% expect their costs to go up a lot.
More than a quarter (27%) are looking at new building methods or materials, and 27% are holding back on starting new projects.
Worryingly, a quarter (25%) said they may have to stop trading altogether.
Three in 10 (30%) said costs will go up by an average of 35% over the next year.
A third expect increases of 21-30%, 27% think costs will rise by 31-40%, while 16% forecast a 41-50% jump and 12% predict costs will go up by 51-60%.
Terry Woodley, managing director of development finance at Shawbrook, said: “Our research highlights the challenges currently confronting developers and the wider housebuilding industry in general.
“Rising costs, planning hurdles and market uncertainty have created a perfect storm which has been exacerbated by fluctuating house prices.
“However, despite the headwinds of the past 12 months, there’s still plenty of reason for optimism.”
Woodley added: “Recent Government announcements, such as the Planning & Infrastructure Bill, could help cut red tape and accelerate progress, paving the way for increased housebuilding.
“Despite challenges, developers have shown remarkable agility, adapting their strategies to remain robust and profitable in a tough environment.
“One thing is clear: to overcome current barriers and make real inroads towards the Government’s housebuilding targets, a collaborative, multi-pronged approach is essential.”
