IN Brief:
- HBF’s Q2 survey shows SME housebuilder confidence weakening across land buying, starts, and market outlook.
- Three-quarters of respondents reported a negative view of market conditions over the next three months.
- Development viability has overtaken planning delays as the largest supply-side barrier for SME builders.
Home Builders Federation survey data shows confidence among SME housebuilders weakened sharply in the second quarter, with viability, market caution, and planning delays weighing on land buying and starts.
The trade body’s second quarterly SME Developer Sentiment Survey found that smaller builders have become more negative about short-term market conditions since the first survey. The results point to a more cautious development environment for businesses already exposed to finance costs, build-cost inflation, planning delays, and buyer affordability.
According to the survey, 75% of SME respondents hold a negative view of market conditions over the next three months, while only 4% have a positive outlook. In the previous survey, 37% reported a negative view and 28% were positive.
Land acquisition intentions have also weakened. The survey found that 49% of SME respondents expect to reduce land purchasing activity over the next three months, while just 18% expect to increase it. Ninety-four per cent said market conditions are causing caution around new site starts, up from 70% in the previous survey.
Forty-eight per cent of respondents said current conditions are causing significant caution or delays to starts, while 45% reported moderate caution. Only 21% expect activity to increase.
For the first time in the survey series, development viability has overtaken planning delays as the largest supply-side challenge identified by SME housebuilders. Seventy-five per cent cited viability as one of the top barriers to delivery, while planning delays were cited by 74%.
HBF also found that geopolitical instability had affected business outlooks. Ninety-nine per cent of respondents said the war in Iran had affected their 12-month outlook more than anticipated, and more than a quarter said it had caused them to reconsider their business position or pause acquisition of new development sites.
SME builders often operate with smaller balance sheets, shorter land pipelines, and less financial headroom than national developers. A delayed consent, utilities constraint, abnormal cost, slow reservation rate, or higher finance charge can affect an entire project rather than one scheme within a larger portfolio.
The weakening of land-buying intentions is therefore a warning sign for future output. Sites not acquired today will not become starts next year, and weaker confidence can move quickly through regional construction supply chains. Groundworkers, bricklayers, scaffolders, roofers, joiners, plant hire businesses, merchants, and specialist trades all depend on smaller schemes moving through the pipeline.
The long-term decline of SME housebuilders has already changed the structure of the housing market. Smaller builders once delivered a much larger share of UK homes, but planning complexity, land competition, finance constraints, regulatory burden, and rising delivery risk have reduced their role over several decades. Rebuilding that capacity has become central to attempts to diversify housing supply.
The latest survey suggests that planning reform alone will not restore confidence. Faster consents can help, but a site still has to remain commercially workable after affordable housing obligations, infrastructure contributions, biodiversity requirements, remediation, utilities, labour, materials, finance, and sales risk are included. When margins are narrow, a modest cost movement can be enough to delay or cancel a start.
Developer contributions are part of that wider delivery equation. Section 106 and Community Infrastructure Levy payments are intended to support the roads, schools, healthcare, public realm, and affordable housing needed alongside development. Scrutiny over unspent developer contributions has grown because infrastructure delivery affects both public support for new homes and the viability of future schemes.
Confidence among smaller builders also sits alongside wider scrutiny of the residential market. While major developers face legal and regulatory pressure over competition conduct, smaller companies are dealing with immediate questions of land, finance, risk, and delivery capacity. Both issues point to a market under strain from different directions.
Regional construction capacity cannot be rebuilt if smaller builders remain too cautious to buy land or start work. Policy will need to address planning resourcing, infrastructure funding, finance access, utilities delays, regulatory predictability, and cost pressure together. Without that, housing delivery will remain heavily dependent on larger developers, while local supply chains lose the steady pipeline of smaller schemes that keeps skills and capacity active.
