UK housebuilder profits forecast to fall 12% in 2026 despite higher completions
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Profits at some of the UK’s largest housebuilders are expected to fall this year even as they complete more homes, exposing a growing problem for a government that wants developers to increase housing supply.
Combined adjusted operating profit at eight major listed housebuilders is forecast to fall 12% from about £2.6 billion in 2025 to £2.3 billion in 2026, according to RBC Capital Markets.
At the same time, completions across those companies are expected to rise about 1% to 72,723 homes.
The figures show why housing output alone gives an incomplete picture of the sector. Developers can continue building and selling homes while making less money on each project. If that pressure continues, it could affect future land purchases, site openings and investment.
The problem has been building for several years. The cost of constructing a new home has risen by about £37,000 since 2020. Labor, materials and financing have all become more expensive, while mortgage affordability continues to limit demand from private buyers.
That leaves housebuilders trying to maintain sales while protecting already thin margins.
Higher completions are masking weaker development economics
For policymakers, a rise in completions may look encouraging. For developers, the economics behind those homes matter just as much.
Higher construction costs reduce the return on each site unless builders can pass those costs on through higher selling prices. That has become harder while buyers face high borrowing costs and weaker affordability.
Recent profit warnings suggest the pressure is widespread.
UK-listed companies in the FTSE Home Construction subsector issued eight profit warnings during the first half of 2026. Six came in the second quarter alone. The first-half total matched the level recorded during the same period in 2008.
Rising labor, materials and financing costs have weighed on margins. Developers have also used mortgage contributions, deposit support and part-exchange schemes to support sales.
Those measures can help buyers complete a purchase, but they create another cost for developers.
The strain can therefore show up in margins before it appears in completion figures.
This distinction matters because current output reflects decisions made months or years ago. Land was purchased, planning was secured and construction began well before a home reached completion.
Future output depends on whether housebuilders believe the next project will provide an acceptable return.
Discounted sales are protecting volumes at the expense of margins
Housebuilders have another way to keep homes moving: bulk sales.
Developers can sell groups of properties to institutional investors, housing providers or other large buyers. These transactions can provide greater certainty and turn unsold stock into cash faster than individual private sales.
But discounts can be substantial.
Bulk transactions have reportedly involved discounts of around 15% to more than 20%. That can help a builder maintain completion volumes while reducing the profit earned from each home.
This helps explain the current outlook. More homes can be completed while earnings fall.
The approach can make financial sense when the alternative is holding completed properties for longer. Unsold homes tie up capital and expose developers to financing costs. A discounted bulk sale can improve cash flow even if it cuts the profit margin.
Greater reliance on incentives and discounted transactions also points to weakness in underlying demand.
Private buyers remain sensitive to mortgage costs. That gives housebuilders less room to recover higher construction costs through selling prices.
If affordability remains stretched, developers face a difficult choice between protecting prices, maintaining volumes and preserving margins. In many cases, they may not be able to achieve all three.
Weak margins could become a housing supply problem
This is where weaker company earnings begin to affect housing policy.
The UK needs developers to commit capital to land and construction before a home can be sold. Those decisions depend on expected demand, financing costs, planning risk and the return available from a project.
If margins remain weak, builders can respond by becoming more selective about land purchases or delaying new sites.
Planning reform may increase the supply of land that can legally be developed, but permission alone does not make a project financially viable.
The wider construction sector presents a more mixed picture. Total construction output rose 1.6% in the three months to May 2026, including a 1.1% increase in new work.
That suggests the difficulties facing housebuilders cannot be explained by weakness across all construction activity. Residential developers face a more specific mix of mortgage affordability pressures, planning delays, rising input costs and lower development margins.
There are still reasons for the sector to expect conditions to improve. Lower borrowing costs would support mortgage affordability, while planning changes could make it easier to bring sites forward. The UK’s housing shortage also provides a long-term source of demand.
But housing targets depend on more than demand for homes.
They also depend on whether developers can build those homes at a return that justifies putting more capital at risk.
A small increase in completions can therefore hide a more important signal. If UK housebuilder profits keep falling while costs remain high, the effect may eventually be seen not only in company accounts, but also in the number of new sites builders are willing to start.
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