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Skills and labour shortages holding back housebuilding progress

Subcontractor cost inflation is showing signs of “moderating”, according to Bovis Homes, but labour availability is a “key constraint” to increasing production.

The housebuilder said that despite average sales prices being up 7% up year-on-year, the higher cost of production meant it expected a 2015 operating profit margin to be only slightly up on the 17% recorded in 2014.

It expects to deliver volume growth of more than 8% in 2015, which would represent a record for the group.

However, it cited planning issues that it said had seen delays on “a number of new high-profit margin sites” and that more new homes were being built on existing sites than on new “high-profit margin sites” as a result.

During 2015, it added 25 consented sites to its landbank, with around 4,000 extra plots. 

It expects to see average return on capital employed of around 28% on these sites.