Future hopes and forecasts



After a momentous 2016, Housebuilder quizzes the industry on what challenges and opportunities to expect this year. Suzie Mayes reports on the sector's hopes and predictions
 
Whatever your view of 2016, mundane it was not. So what next as we enter 2017? Housebuilder has turned to a group of experts – housebuilders, industry bodies and commentators – to discover the key issues likely to affect the housebuilding sector this year.

A year ago, the scene was somewhat quieter. David Cameron was at the helm of No 10, and the industry was pleased – overall – with his housing policies. A date for the EU referendum was yet to be set.

There has since, of course, been a change of administration. But the sharp focus on housing – to the relief of the sector – continues. Now housebuilders are keenly awaiting the Housing White Paper for further detail of how Theresa May’s government intends to help the industry build 1 million homes by 2020.

“Brexit”, unsurprisingly, is a recurring theme for our contributors this year, and how the government’s moves towards it could impact the industry and wider economy. But with the continuing strength of the housing market, the phrases “cautiously optimistic” and “guarded positivity” sum up the coming year for some of our experts.

Other subjects our contributors have highlighted include ongoing matters – the still laborious planning system, skills (in part linked to Brexit), stamp duty, and hurdles for SMEs.

(Pictured) “Time to be nimble on your feet" – Colin Cole, ceo, Lioncourt Homes

One or two of our experts are concerned about the possible ramifications of world events. Elections in Western Europe this year could give rise to antiestablishment nationalist parties, warns Colin Cole, ceo of Lioncourt Homes. And there is the unlikely new US president. “There is a risk [Donald Trump] may start a trade war with China that could have global consequences,” he fears.

Housing policies
But, here in the UK, "there is much to be positive about in 2017,” states David Thomas, ceo of Barratt. “Although there remains considerable uncertainty around Brexit, the mortgage market is very strong with low interest rates and powerful support for homebuyers in the form of Help to Buy”.

(Pictured) "There will be a focus on delivering homes that fall under the £600,000 Help to Buy limit in London and across the UK to supply the first time buyer market" – Greg Hill, deputy md, Hill

A handful of housebuilders cite the Help to Buy equity loan scheme as a welcoming continuing initiative. One trend emerging in 2017 will be an emphasis on delivering homes falling under the £600,000 bracket for H2B, “to supply the first time buyer market,” forecasts Greg Hill, Hill’s md. The industry will be keen for some clarity on H2B’s future beyond 2021, notes HBF’s executive chairman Stewart Baseley – “so critical to the increases in supply we have seen”.

Baseley says that with a government fully committed to more housebuilding, and a “assuming a level of political and economic stability,” the industry should further increase supply this year. In fact, 2017 looks set to be “the first year since 2008 in which the UK might build 200,000 homes," proclaims John Tutte, ceo of Redrow. This is a realistic goal, indicates Chris Endsor, Miler Homes’ ceo. “In my view the wider industry is stepping up to the plate to deliver more homes to meet demand and the government’s target,” he says. But, as ever, the planning system will present the greatest challenge to achieving the magic number: “The planning process remains inefficient, too lengthy and under resourced in many local authorities.”

Housing white paper
What the industry needs to see now is the much vaunted Housing White Paper. At the time of writing it was yet to be published. “It’s hard to say how the year will be for the industry before the White Paper is issued,” says John Anderson, md of Kier Living. “The delivery of the government's intentions will depend on the White Paper.”

(Pictured) "It’s hard to say how the year will be for the industry before the White Paper is issued" – John Anderson, executive md, Kier Living

However, there is a general air of excitement around its imminent release – and hopes. “We are hopeful amongst other things it will set out policy to bring more land forward for new homes,” says Barratt’s David Thomas.

Hopefully the White Paper will contain further work on streamlining planning conditions, says John Elliott, md of Millwood Designer Homes. “Schemes can take up to a year to start because of planning conditions not being signed off.”

The publication, if the tone is right, should cover off many areas for the industry, says HBF’s Stewart Baseley. “If, as has been suggested, the imminent White Paper and Industrial Strategy continue the positive work done by successive governments to develop policies, it will enable builders to grow their businesses with confidence. This will result in the industry being able to increase capacity by taking on and training more people and investing more in its supply chain and in land.”

But while Kier’s John Anderson is “enthusiastic” about the paper’s arrival, “I don’t think it will change things significantly.”

Other desires
Meanwhile, Avant Homes would like to see a change in government policy to a more regional approach this year. For example, says ceo Colin Lewis, the first wave of the government’s garden village initiatives only included a slim number across Avant’s trading regions of the Midlands, Yorkshire and north east of England. “In short, we have yet to see evidence of a concerted commitment by this government to pursuing the sort of regional approach to the UK economy that will help the entire country.”

Alan Brown, ceo of CALA Homes, says that over the coming year, the whole housing chain could benefit from a greater focus on larger family homes: “Not only will this encourage movement further up the housing ladder, but it will also free up smaller properties already in the UK’s existing housing stock to meet the growing demand from first time buyers.”

And, buoyed by the government’s commitment to exploring all housing tenures, at the upper end of the housing ladder is Clive Fenton, ceo of retirement giant McCarthy & Stone. He is urging the government to “create planning policies that support better housing options for older people, including retirement housing.”

Brexit
It is staggering to think now, but a mere year ago, the EU referendum was not even a certain event for 2016. Since the unexpected result last June, various outlets have worried and surmised. Yet in terms of demand, overall housebuilders have not adversely suffered from the UK’s decision to leave the European Union. Most of our contributors reference the buffering effect of economic stability and a robust housing market, but note the looming threat of inflation.

In the immediate aftermath of the vote, Steve Midgley, founder of Fairgrove Homes, says he was apprehensive. “But when I analysed the voting figures, we operate in an area (East Midlands) that voted very highly to leave. The result is that overall there seems to be little concern amongst our buyers, so for the time being I don’t see much changing.”

But nothing concrete has taken place since the vote, aside from the prime minister announcing that the UK will not remain in the EU single market following its departure.

“Uncertainty” is the key word this year for several of our commentators. Karl Pickering, director of Tern Developments, comments: “Uncertainty affects all markets as there is a tendency to sit and wait to see which way we are heading before decisions are made both in business terms but also house purchasers.” Exchange rates are already affecting material prices, he adds, “and there is the possibility of increased labour shortages if foreign workers are prevented from remaining in or entering the UK.”

More recently, business and consumer confidence has waned, cautions Lioncourt’s Colin Cole, “and this is in the context that Brexit negotiations have not even started yet”.

Article 50 is due to be enacted next month (March). John Anderson expects little impact from the triggering of the formal process. “It’s just a flag in the ground,” he says. Aquinna Homes’ md Stephen Brazier suggests a “blip” in the housing market directly after the event.

(Pictured) "The government must implement measures not only to retain the international talent already attracted to the UK, but to further support the sector to train and upskill the existing UK labour force" – John Tutte, ceo, Redrow

But Redrow’s John Tutte stresses the possible implications for an already depleted skills set. He instructs the government to “implement measures not only to retain the international talent already attracted to the UK, but to further support the sector to train and upskill the existing UK labour force.” However, determined to push the positives, Midgley encourages the industry to embrace the opportunities that Brexit could present. “Suppliers from the wider world for instance”.

Stamp duty
Another shock the industry absorbed in 2016, says Colin Cole, was the government’s 3% hike on stamp duty for Buy to Let and other additional properties. And some housebuilders are still experiencing the consequences of 2014’s stamp duty reform on house purchases, which hit costlier properties. Jason Rishover, ceo of Heronslea Group, says: “Government initiatives to support the housing market will have little impact on 2017 as they merely scratch the surface of the stock problem. Reducing stamp duty would be an option.”

Millwood’s John Elliott hopes for rapid stamp duty change. “It’s holding back Zones 1 and 2 and affects us. We’re now not pricing homes in excess of £1 million.”

House prices
Despite the stamp duty upheavals, Matt Fleming, ceo of Aylesworth Fleming, states that the housing market is currently experiencing a period of “rare stability that has not seen prices change by more than 1% in any three-month period since November 2014”. This could turn on the introduction of Article 50, but for this year: “I anticipate the final UK average price (according to the Nationwide index) increasing by between 1% and 2%.”

Quality
As housebuilding ratchets up this year, good quality must rule. “Having increased our own output by 50% in the past five years, we will continue to work really hard to maintain our five-star customer satisfaction rating,” comments Barratt’s David Thomas.

(Pictured) "Having increased our own output by 50% in the past five years, there is much to be positive about in 2017" – David Thomas, ceo, Barratt

With demand for quality homes remaining solid, NHBC’s focus here “will continue unremitting”, confirms NHBC’s md Neil Jefferson. One of its recent successes is the introduction of its Construction Quality Reviews, undertaken by NHBC inspection managers across the country. “The initiative has been helping housebuilders achieve the very best results, first time, every time and will be available to more builders throughout 2017,” Jefferson says.

And to assist the delivery of these high quality abodes, Hill’s Greg Hill predicts a rise in the number of joint venture partnership agreements between housebuilders and housing associations. “Pooling resources, talent, skills and knowledge through partnership collaboration provides a flexible working model which could unlock a wealth of untapped opportunities and increase housing production across the UK.”

The industry enters 2017 “with guarded positivity,” HBF’s Stewart Baseley says eloquently. There are weighty challenges ahead but the fundamentals remain strong. At the same time, it is the adaptable who will do well this year, Colin Cole advises. “Time to be nimble on your feet.”



SMEs
Restricted access to finance continues for smaller housebuilders, observes Karl Pickering, director of SME Tern Developments.

Last October, the government launched the Home Building Fund, targeting smaller outfits. Small housebuilders Fairgrove Homes and Aquinna Homes have applied for the fund. Midgley likens the process to “pulling teeth”, but at the time of writing was hoping to soon complete the procedure.

And at the time of speaking to Aquinna Homes’ Stephen Brazier, the company was in the early stages of applying for the fund. “The Homes and Communities Agency are now much more active at the smaller end of housebuilding,” he says. “But I’d like to see more public land carved into smaller parcels.”

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