According to the research, 61% of respondents said that supply chain issues and rising material costs were the biggest challenges adding pressure to their bottom line.
Looking ahead, land availability is expected to have the greatest impact on the housebuilding sector over the next three months, followed by planning reforms, policy uncertainty and the price of land.
Availability of land was also identified as a bigger challenge this quarter compared with Q2, with 21% of housebuilders saying it was a challenge compared to 16% the previous quarter.
Asked about the availability of land, 80% of respondents said it was ‘limited’ or ‘very limited’.
The land market has been boosted by strong demand for new homes, with 36% of respondents saying that site visits and reservations increased in Q3 compared to Q2, with 50% saying they stayed at the same level.
Average land prices in Prime Central London were flat on a quarterly and annual basis, according to Knight Frank’s latest Q3 Land Index. With several countries yet to open up their international borders, there is a weaker appetite to secure new land sites in PCL. However, the existing tight supply continues to support prices. Greenfield land prices strengthened between July and September by 5.5%, while brownfield land prices rose 2.5% this quarter.
Justin Gaze, Head of Residential Land at Knight Frank, said: “Build cost inflation is the most talked about topic in the land market at the moment, and it is anticipated that this will not ease in the short term. This, combined with delays in the planning system, are going to significantly impact the delivery of completed new homes in the market.”
Anna Ward, a Senior Research Analyst at Knight Frank, added: “In many cases, UK housebuilders are managing the rise in build costs due to house price inflation in sought after areas. Our survey reflects this, with over half of respondents saying the current rate of house price inflation is helping offset build cost increases. However, if build costs do not settle down at a time of cooling house price growth and rate hikes, this will have a knock-on effect on land prices.”
