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Supply chain issues causing concern for 60% of housebuilders

Supply chain concerns and land supply issues are putting the delivery of new homes at risk, according to new research by global property consultancy Knight Frank.  

Indeed, over 50% of England’s leading volume and SME housebuilders were surveyed by Knight Frank, and 61% of them cited rising material costs and supply chain issues as the biggest challenges they face, adding pressure to their bottom line. 

In addition, the housebuilding sector is expected to be impacted by a lack of available land over the next three months, as well as planning reforms, policy uncertainty and the price of land. 

The availability of land has already become more of a concern in the third quarter compared with the second, with 21% of housebuilders claiming it was a challenge compared to 16% previously.  

When asked about the availability of land, some 80% of those surveyed said it is either ‘limited’ or ‘very limited’.  

Strong demand for new homes is driving the market for land, with 36% of respondents saying that Q3 brought about an increase in the number of site visits and reservations compared to Q2, while 50% said they remained roughly at the same level.  

According to Knight Frank’s latest Q3 Land Index, average land prices in Prime Central London (PCL) were flat on both a quarterly and an annual basis. With a number of countries still applying restrictions on international travel, the appetite to secure new land sites in PCL remains weakened – however, prices remain buoyed by tight supply. The data from the index also showed that the third quarter saw greenfield land prices increase by 5.5%, while brownfield land prices rose by 2.5% over the same period.  

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.”

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