96% of SME housebuilders hesitant to invest as 61% plan fewer starts, HBF survey finds

Some 96% of SME housebuilders are hesitant to invest in new developments and 61% expect to start fewer homes over the next three months, a Home Builders Federation (HBF) survey published on 27 October found.

The quarterly SME Sentiment Survey, run with specialist development lender Quantum Development Finance, shows the share of smaller builders expecting to cut starts has risen from 52% last quarter and 29% at the start of the year, HBF said.

Land buying is following the same path. HBF said 58% of respondents expect to buy less land over the next three months, more than double the 27% recorded at the beginning of the year.

Neil Jefferson, Chief Executive of the Home Builders Federation, said: "Small and medium-sized home builders are finding it increasingly difficult to operate as both the cost and burden of building each home continue to rise."

The constraints

Development viability was the most cited supply constraint, named by 84% of respondents, with planning delays second at 72%. HBF said new taxes, levies and inflation have added about £76,000 to the cost of building each new home.

On the demand side, respondents pointed to wider housing market conditions (69%) and low buyer confidence (64%). Mortgage rates were cited by 41%.

Confidence in Government is low: 95% of respondents said they were not very confident or not at all confident that ministers would deliver meaningful improvements for the sector. Respondents in the Southwest were the most negative, with 88.9% reporting a negative outlook, HBF said.

Period	SME builders expecting to start fewer homes
Start of 2026	29%
Last quarter	52%
Latest survey	61%

Despite the gloom, 75% of respondents said demand-side measures such as the proposed Your First Home equity loan scheme or reform of Stamp Duty Land Tax could encourage additional site starts. A further 18% said such measures could help bring forward sites already in their pipeline.

Oliver Thompson, Chief Executive of Quantum Development Finance, said: "From where we sit as a lender, viable schemes are being delayed not for lack of ambition, but for lack of certainty."

HBF's asks of Government include reducing the cumulative cost of building new homes, removing fiscal barriers to development, unlocking Section 106 affordable housing delivery and providing greater long-term funding for local planning authorities.

The previous quarter

The August edition of the survey drew 114 responses from SME builders in England and Wales, with fieldwork from 15 July to 1 August. It recorded a net balance of -39% for land purchases, down eight percentage points on the quarter before, and a net balance of -28% expecting to increase output over the next three months.

In that survey nine in ten respondents agreed Building Safety Levy costs would render developments unviable, and 36% said they had already delayed, redesigned or cancelled schemes because of the levy, HBF said.

Registrations fall

The National House Building Council (NHBC) reported the same week that 26,231 new homes were registered in Q3 2026, down 13% on the 30,279 in Q3 2025. Private sector registrations fell 8% to 18,359, while rental and affordable registrations dropped 23% to 7,872.

The largest regional falls were in the South East (-32%), Northern Ireland (-32%) and Wales (-24%), NHBC said. Yorkshire and The Humber grew 27% and the West Midlands 10%. London registrations have fallen from 5,130 in Q3 2019 to 1,223 in Q3 2026.

Daniel Pearce, Chief Strategy Officer at NHBC, said the housing industry is at a critical point.

The Budget

The Budget on 28 October confirmed the Your First Home scheme. According to the Ministry of Housing, Communities and Local Government, buyers will receive a government equity loan worth 20% of the purchase price, interest free for five years, with a deposit of at least 2.5%. Household income must be £110,000 or less outside London, or £140,000 or less within London.

Developers will pay participation fees of 1% on the first 100 homes sold under the scheme and 3% on the next 150. The department said £4.7bn is available over five years and the scheme is expected to open for applications in February 2027, with a full list of price caps by local authority area to be published shortly. The Government first announced the 20% equity loans on 26 September.

NHBC said the Budget also added £1.5bn to the Social and Affordable Homes Programme and called the introduction of Your First Home a positive step. Paul Turner, Chief Executive Officer of NHBC, said the industry must skill up if it wants to build up.

Jefferson said the 1.5 million homes target was always incredibly challenging but the need to increase supply remains.

What happens next

HBF held a members-only Budget webinar on 29 October, with a panel including Ian Workman, Chief National Officer at Homes England. The National Scheme of Delegation comes into effect on 31 October, and HBF is briefing members on it on 5 November.