Busy Summer? We Are Ready For It...

Mark Oliver

This time last year the industry was in a state of shock. With more than a respectful nod to Help to Buy, the number of new housing starts in the first half of last year was the highest for that period since 2008.

The country was most certainly building again and there was high demand for building products, a demand that we had not seen since before the economic crash. Nobody was prepared for what happened in the second quarter of 2013; in fact our sales at H+H were significantly lower in the first quarter of 2013 than in the same period in 2012. We had no reason to believe that the following months would be anything other than steady, but they were...

The NHBC's final statistics for last year showed a 28 per cent year on year increase in new home registrations. A total of 133,670 new houses were registered making 2013 the busiest year for house building since 2007. The consequence of this success was a temporary shortage of materials across the entire industry resulting in the summer of 2013 seeing stress levels rise in accordance with the new build figures.

Feeling the Heat

It was not only the manufacturers that felt the heat; everyone was affected, from merchants to major house builders to the general builder working for himself. Nobody expected Help to Buy to take off in the way it did.

Since the launch 14 months ago, 22,831 people have bought new-build homes through Help to Buy: equity loan scheme. there have also been 7,313 sales through the Help to Buy: mortgage guarantee scheme and a further 5,173 sales through the Help to Buy: NewBuy scheme. This takes the total number of sales through the initiative to over 35,000; three-quarters of which are new-builds.

H+H blocksMany manufacturers up and down the country, have now added capacity. In the case of H+H as soon as we atarted to see a rise in demand (May 2013), we increased our production shifts up to maximum production levels, recruited more manufacturing and sales order processing personnel and from September last year to at least the end of 2014, have implemented strict, organised and importantly, fair dispatch schedules.
One of the issues we faced both last year and this year is that of stock holding. Last year this aggravated the situation because many of our customers were doubling their order quantities out of fear of not being able to buy enough product. This is no longer an issue Building sites and merchant branches are certainly fuller with aircrete than they were this time last year and are well prepared for a busy summer; a very different position to what was happening last July when lead time were ever increasing with no likelihood of reducing. Now though, everybody knows what they are getting and when and as a result are prepared for a busy, but importantly organised, summer.

The Calm Before the Storm?

Problems, - busy ones or quiet ones - will only arise if the level of uncertainty around the market rises but I do not see this happening until after the general election. Since the start of this year the level of new home registrations has remained relatively constant, with the exception of a dip in February which one could feasibly say was the fault of the weather.
A lot of people are calling for Help to Buy to be curtailed because they believe it to be the cause of the house price boom and the much hyped London housing bubble but if you look at the statistics this is not the case.
For starters, the majority of Help to Buy completions have occurred outside of London. Also, as 31.9 per cent of first-time completions have had a purchase price of between £150,001 and £200,000, the median purchase price in the scheme in the first year was £184,995 and the mean was £204,805. This is well below the average London house price of £485,000.

HomesFurther evidence that Help to Buy is not causing the London bubble, is the statistic that 30.7 per cent of the completions were on terraced properties, not luxury detached properties and 87.5 per cent of all purchases were made by first time buyers. Help to Buy is doing what it set out to achieve. First helping fist time buyers and secondly stimulating home building.

Despite the calls from economists, warnings from Europe and cautionary word from the Bank of England, I believe that George Osborne will hold his nerve and keep Help to buy going. It was not that long ago the scheme's critics were at full voice and the next day The Chancellor announced the scheme would continue to 2020, should the Conservatives remain in power. Unlike those who write the headlines, Osborne has all of the data and this data proves that the scheme has enabled more houses to be built, helped first time buyers get on the property ladder and aided many people into gainful employment. I also think that even if we have a different Government going into summer 2015 we will still see Help to Buy supporting the industry for the initial period; no new government is going to take away a scheme that is so obviously supporting economic growth. Well I would like to think it wouldn't.

The issues surrounding London and house price inflation are completely separate to Help to Buy; cash buyers, speculative and foreign investors are where the problems lie, but solving that's a whole other topic, one probably best left for another day.

In the meantime let's all continue to enjoy the positivity surrounding our much beleaguered industry. We seem to seek out the negatives even when the positives are staring us right in the face. This summer is looking very different to 12 months ago, although, whilst we are organised and more prepared for the unexpected, we cannot let complacency creep in. Forecasting is never an exact science...

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