David Fell, lead analyst at Hamptons, said: “2025 was another tough year for many housebuilders, giving the government a growing headache regarding its 1.5 million homes target.
“While the average buyer purchasing a new home secured a rate of 4.5 per cent last year (down from 4.8 per cent in 2024), there is a rising risk that mortgage rates may have bottomed out.
“Energy inflation, driven by events in the Middle East, may prevent central banks from making the cuts that markets had already pencilled in for the coming months.
“In the tougher markets of yesteryear, big bulk sales to investors kept housebuilders ticking over; however, as John Lewis has shown in recent weeks, many institutional investors are struggling to make the sums stack up.
“House prices have fallen across parts of Southern England, with flats, in particular, achieving lower values than they did five years ago.
“Private investors willing to buy into city centre flats two-to-three years off-plan are few and far between.
“And while build cost inflation has slowed to single digits, costs are still rising from a high base, remaining 40–50 per cent higher than they were five years ago.
“Taken together, these factors have squeezed profit margins, meaning building homes on many sites is not currently viable.”
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