Profits at the UK’s largest housebuilders are projected to fall 12% this year as the sector remains stuck in a downturn marked by persistent cost inflation and weak demand.

RBC Capital Markets estimates combined adjusted operating profits for 2026 will be £2.3bn, down from £2.6bn a year earlier. Rising material, labour and site costs have outpaced house price growth, with the Home Builders Federation noting an extra £37,000 added to the cost of building a new home since 2020.

The slowdown is hurting the entire supply chain. Investec analyst Aynsley Lammin warned that the building‑materials industry has been in a “relentless grind” for four years with no sign of recovery. Bulk sales are now common, with discounts of 15‑20% off the original price, a move that pushes up volumes but squeezes margins.

Market conditions also pressure new‑build developers. Bellway’s bulk sales helped lift completions by 11%, yet the overall environment threatens to undermine the new PM’s council‑house programme, as higher mortgage rates and a stalled Bank of England base rate of 3.75% dampen demand.