Survey: a hard Brexit would slow housebuilding

Key findings:

• 68% of respondents said a hard Brexit will have a negative impact on housebuilding;
• 84% think a hard Brexit will exacerbate rising construction costs;
• 76% said a hard Brexit will make the cost of development finance more expensive;
• 52% responded that residential development activity will decrease in the event of a hard Brexit;
• 56% of developers think a hard Brexit will lead to a fall in house prices;
• Just over a third (36%) of developers said a hard Brexit would cause demand for housing to fall.

After unequivocally establishing that Brexit means Brexit, the conversation moved on to what sort of Brexit the UK should have. Hard, soft, or even – in one of Theresa May’s most bizarre attempts to dodge the question – red white and blue.

Brexit is now apparently available in a variety of colours and sizes, but which one would best suit the housebuilding industry?

In collaboration with Urban Exposure, Show House launched a ground-breaking survey to find out what housebuilders hopes and fears are as Theresa May pens a speech to spell out exactly what Brexit means.

According to the results of the survey, 68% of developers think a hard Brexit will have a more negative impact on housebuilding than a soft Brexit.

“A hard Brexit will leave housebuilders exposed to a whole host of unpredictable variables – from the cost of building materials to the supply of labour,” Howard Crocker, Managing Director, Delph Property Group, said. “A soft Brexit with an agreement on access to the single market and the EU’s Customs Union is surely the more attractive options and the route promising the most continuity.”

It seems the biggest cause for concern is the cost of construction; 84% of developers believe that a hard Brexit would lead to increased costs – 32% believe that costs would rise significantly.

“A shortage of skilled labour could push up wage bills and materials imported from abroad will cost more if the pound fails to recover lost ground against other major currencies,” said Paul Keay, Property Development Director at United Trust Bank. “Developers should therefore build in a suitable contingency for higher build costs at the earliest stages of planning.”

While only just under a quarter (24%) of developers are worried that access to finance will become more limited if the UK leaves the single market, 76% of respondents think a hard Brexit will make the cost of development finance more expensive.

“The Brexit, whether hard or soft, will have some implications for new home builders but I don’t believe it will affect the availability of development finance from experienced and well-established specialist lenders,” said Keay. “Whether or not the cost of development finance will increase largely depends on what happens to the UK Base Rate.”

As a result, 52% of developers think residential development activity would decrease in the event of a hard Brexit. A further 56% developers think a hard Brexit will lead to a fall in house prices. Just over a third (36%) developers think demand for housing will drop in the event of a hard Brexit.

“2016 has been the year when uncertainty is the only certainty,” said Randeesh Sandhu, CEO of Urban Exposure. “Our survey shows that a ‘soft’ Brexit is clearly preferable and there are notable fears for increasing construction costs. So there is clearly more the government can do to reassure and support SME developers.

“Encouragingly, our survey shows there is still confidence among SME developers that they can get access to the finance they need to keep on building and we are committed to playing a part in providing that. SME developers must be the agents who boost housebuilding rates to the levels the government aspires to, and our survey underlines how a ‘soft Brexit’ which continues to include access to the single market will be crucial to helping them achieve this.”