The latest housebuilders’ survey from the FMB revealed that buyer demand has fallen to the lowest point since the survey began recording data, with demand scored 1.99 out of five.

The trade body listed a series of reasons for the lowest rate of demand in eight years.

The main cause cited in the report was the planning system, followed by restricted mortgage availability, with 51% of SME housebuilders highlighting this as a key barrier — a steep rise over the past two years.

Other reasons include a lack of available land and the cost of materials, which members believe will fall over the next three years.

The fifth main cause for the drop in demand was the dearth of finance to companies.

Brian Berry, CEO at the FMB said: “This year’s FMB housebuilders’ survey shows that the housing market for smaller housebuilders is in an increasingly difficult place, with perceived buyer demand hitting the lowest levels since our records began in 2015.

“There are signs this will pick back up again, but the already beleaguered SME housing sector — which delivers a fraction of the market share it once did, at around 10% compared to 40% just over 30 years ago — looks like it will limp into next year.”

DFT asked industry professionals how restricted mortgage accessibility and low buyer demand could impact housebuilder and developer exit routes and, subsequently, the volume of viable business within the housebuilding market.

William Lloyd-Hayward, managing director at Sirius Finance, commented: “In the current economic environment, many households, both homeowners and renters, are sitting tight and waiting for greater certainty ahead of making a decision to buy property.

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“However, inflation is now falling and we are already seeing a mortgage price war, so the signs for 2024 are more positive.

“Confidence can swing quickly in any market and property is no exception, so there is reason to believe we will see greater demand from potential homebuyers in the next 12 months, particularly in the second half of 2024.

Guy Murray, head of development finance at West One, added: “Exit routes for housebuilders and developers are coming under more pressure with a sluggish sales market being the result of such sharp interest rate increases by the BOE.

“Developers will increasingly be looking to put some stock onto longer-term mortgage products and renting out the homes if they are unable to sell in the current market conditions.

“This means more equity is tied up in existing stock and it impacts their ability to buy the next site, which will reduce and put pressure on the supply of new homes in the coming years.”

Chris Gardner, joint CEO at Atelier, said: “The planning system, which must shoulder a lot of the blame for the slow delivery of new homes, unsurprisingly came out as the top constraint.

“The availability of mortgages was found to be the second biggest barrier, followed by the lack of available land.

“Taken separately, these are significant challenges but, when added together, amount to a very large roadblock to the delivery of new homes and the health of the SME developer sector, the frustration is that these issues are all avoidable.

“For instance, planning reform will free up land and ease supply constraints, however, arguably the quickest way to unlock the market is if mortgage lenders increase LTV ratios, rather than penalising new builds compared to second-hand stock.

“The wheels of the market could once again begin to turn if mortgage lenders step up — the answers are right there in front of us.”