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Impact of virus and lockdown set to cause historic decline in housing delivery

The knock-on effects of the spread of coronavirus and the subsequent government lockdown will result in 56,000 fewer homes being delivered in the UK this year, according to Knight Frank.

The global consultancy calculates that this will represent a 35% drop when compared to the Office for Budget Responsibility's estimate of private housing delivery made last month.

Despite some housebuilders now preparing to return to work, the impact of Covid-19 on the sector has already been 'dramatic'.

The report estimates national housing delivery to stand at around 104,000 by the end of this year.

The outlook is bleak in the capital, where Knight Frank estimates that housing delivery will hit its lowest point since 2014, with 8,000 fewer homes built compared to the five-year average of 14,405 completions.

It says this drop-off in private delivery will have a significant impact on the Mayor of London's annual target of 55,000 new homes.

Meanwhile, the firm's review of pipeline data suggests that as of April 17, work had been suspended on residential schemes capable of delivering up to 250,000 homes across the UK.

"Faced with supply chain challenges and a national material shortage, developers are under increasing pressure to adhere to tight social distancing controls, while also coping with an ever dwindling availability of skilled workers," says Justin Gaze, head of residential development land at Knight Frank.

He says that there is a 'dark cloud' over housebuilders' capacity to deliver at scale and speed.

Government guidance says construction sites can stay open, as long as social distancing rules are adhered to. With some housebuilders setting out their strategies for a phased return to operation, Knight Frank says it will be a slow and steady return to activity.

Even under the assumption that builders can get back to work in early to mid-May, Knight Frank says there will be supply chain issues related to building materials, delivery, distribution and labour.

Gaze is calling on the government to introduce a range of measures to support the private sector in getting building again. These include extending Help to Buy, relaxing planning regulations to give developers greater flexibility, introducing a stamp duty holiday and streamlining the conveyancing process.

"These measures would no doubt act as a real driver for the wider UK economy; helping to create jobs, new housing and ultimately receipts for the treasury via increased liquidation in the market," he says.

Oliver Knight, research associate at Knight Frank, adds: "Consumer sentiment will also impact recovery, and the fact remains that housebuilders will only build what they can sell."

"In the short-term, this will mean giving priority to restarting and completing sites where there are existing customer orders."

"If Covid-19 disruption is short-lived, that could mean the UK can get back on track relatively quickly. However, the longer the disruption the greater the pressure on the market and longer the recovery," says Knight.

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