BLOG : Conflicting views of a challenging market

02 Nov 2012


At our Housing Market Intelligence conference last month a couple of delegates remarked to me how gloomy they had found the mood of the speakers. I could not help but comment that they should have been at HMI in 2009: “Now that,” I said, “was gloomy.”



My unscientific straw poll at HMI suggested that the delegates that found the conference mood downbeat were in the minority. Most felt that the tone of the conference was right and represented the market as they imagined it would be – difficult for mortgages, difficult for financing but with opportunities emerging for those willing to innovate and be imaginative.



However, the disparity of view illustrates how difficult it is to assess exactly where the industry is today. Are things improving, even going well, as the majority of the big listed builders are suggesting? Or are things grim, worse than expected and with a poor outlook, as the gloomier commentators and some suppliers are suggesting?



In a way, the two housebuilders who spoke at HMI summed up the different outlooks. Pete Redfern, ceo of Taylor Wimpey, was largely positive. He looked at the market five years ago, at the changes that had been wrought by the credit crunch and looked ahead with some confidence to five years hence. But Richard Werth, ceo of Banner, painted a bleaker picture in which customers are restricted by mortgages and opportunity constrained by finance.



The listed companies certainly seem happier than most – they are stable, visitors and reservations are up, margins improving and the outlook generally OK. They are living with the mortgage limitations and are likely to benefit from FirstBuy and NewBuy. SMEs based in the south east may also be happy with the way the market is going, as any recovery seems to be based here.



But from the point of view of other smaller builders as well as the government and some material suppliers, the answer may well be “no, the market is not going well”. The finance problems are challenging and there is no easy solution on the horizon - the new mortgage market review from the FSA will not help. Figures for new starts this year look grim and worse than 2011. The NHBC says that UK private sector registrations in Q3 this year were 7% down on last year. The Construction Products Association says private starts in Great Britain will be 98,400 this year, 3% down on already disappointing 2011 figures.



It was noteworthy that at HMI Redfern did not refer to Taylor Wimpey’s new starts – and in an otherwise confident performance was a little defensive when questioned on this from the floor: “There is only so much you can cover in 25 minutes,” he said. But Taylor Wimpey, as with most of the other big housebuilders, are not chasing volume or looking to boost starts dramatically. Steady growth will do fine, with improving margins.



So starts remain suppressed, which is not good news for the economy, for suppliers and for those not able to ride the mortgage storm.



On the positive side, these figures have clearly come to the attention of the prime minister David Cameron. His speech to the Conservative party conference was unequivocally pro-housebuilding: “There's something (else) we need to do,” he said.”And that's accept we need to build more houses in Britain.”



Cameron’s view was supported at all the party conferences. There is a real belief that something has to be done to boost housebuilding – that the government needs to intervene. It is doing this with FirstBuy and NewBuy and Funding for Lending. These are taking time to filter through, but no one said it was going to be easy.



Others want more radical interventions. Using the quantitative easing money to build new homes is one popular idea among the chattering market commentators. Other ideas are less radical but require a change of thought by the industry – not least looking at private rented models and accept that the owner occupier market is badly broken.



Which brings us back to HMI. Sir John Banham of the Future Homes Commission, Peter Schofield of DCLG and Richard Donnell of Hometrack all called for the industry to embrace private rent as the way forward.



Peter Redfern, on the other hand , was not so sure that the PRS is the solution.



And there lies the problem – this is a surprisingly complex situation. Views on the way out of the housing crisis vary massively even in the columns of this magazine and at our conferences.



But despite this I do not agree that the situation is excessively gloomy – not like 2009. There are initiatives underway to help the market and new models for the industry to explore – challenging times, yes, but exciting too if these opportunities can be identified and grasped.






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