Don't believe the hype: next year will be strong
There are plenty of commentators starting to suggest that the much-discussed recovery in the housing market could be short lived. However, my own view is that 2015 will see a sustained growth in new housebuilding with the resultant increase in demand for merchants’ stocks.
True, there has been a slow-down in the rate of growth over the summer. The British Bankers’ Association reported that mortgages for house purchase in August were 3% lower in August than in July and 14% lower than January.
NHBC supports this finding, with its own figures revealing that registrations for July dropped slightly compared to the same period last year while for the rolling quarter May – July, growth was only 1% on last year.
However, before we all resign ourselves to another recession, let’s just consider the wider perspective:
There is still a suppressed demand for housing and the shortage of housing is widely recognised. More significantly, politicians of all parties have acknowledged that housing is a significant issue for voters as well as a driver of economic growth and all are announcing policies to support new house building.
The Bank of England has helped here by publicly declaring that the Help To Buy Scheme is not a contributory factor in rising house prices and that it therefore is not a threat to the UK economy (October 2).
This is helpful as it supports Government plans to extend the scheme and, as a very effective stimulus to new house building, this is welcome.
In addition, the political heavyweights of the current government are lining up to make housebuilding plans a feature of the election campaign. At the Conservative Party Conference Eric Pickles announced the £1billion funding being made available for new housebuilding through the Large Sites Infrastructure Programme, suggesting that these measures will contribute to an overall objective to build 200,000 new houses each year.
A new Help to Buy: Starter Homes initiative announced at the same time should focus support on first-time buyers looking to buy new homes built on brownfield land (nicely avoiding issues around the release of land for development).
Depending on your viewpoint, you might consider that the Labour Party’s take on new housebuilding is more important for 2015 and beyond, so it is good to see a consensus on the desired outcome, even if the means of delivering it vary.
The Labour Party Conference saw robust commitments to increasing the number of first-time buyers (400,000 a year was the figure quoted). This commitment was further supported with the recent publication of the Lyons report in which more detail was added about how the number of new homes can be increased via a range of policies relating to land availability, local control of planning issues and funding. The headline target for the Lyons report is that ubiquitous 200,000 new houses per year.
For us as manufacturers (and our merchant customers) the mechanisms by which housebuilding is stimulated matter less than the fact, so the best news of all is probably contained in the Get Britain Building 2020 Delivery Plan 8 (September 2014) which cites a genuine cross-party support to the objective of hitting that 200,000 target.
All which probably serves to reflect the fact that politicians of all parties are realising that stimulating house building not only addresses a demand for more housing but also, simply by the activity created, provides a rapidly-felt stimulus to the whole economy.
We can see the results of this general increase in activity in the fact that demand for our products in RMI projects is increasing almost as fast as that for new build. The Construction Products Association recently reported that the RMI market is set to grow by 6% in 2014 and 2015 – the fastest rate of increase in this sector ever recorded.
If all the parties really have now acknowledged the political mileage to be made out of new housebuilding then potentially we can be assured of some long-term support. In an ideal world this would extend beyond the role of encouraging private-sector development and consider how the supply of social housing should be increased.
This is surely necessary if we are to meet the 200,000 target. Even in its relatively upbeat Autumn Statement, the Construction Products Association suggests that the 18% increase in new houses in 2014 and the 10% it forecasts for 2015 will only provide 173,000 new houses per year.
Perhaps, in considering whether a commitment to deliver new social housing would appeal to the electorate, the parties might do worse than pay attention to the September 2014 report from the Fabian Society, suggesting a clear majority of voters are in support of an increase in social housing.
Wherever the motivation comes from, as a manufacturer I would urge governments to have some consistency in policies. We have seen over the last 18 months what volatility can do to the supply chain with short-term product shortages the inevitable result of a rapid rise in demand.
These shortages are in some cases being addressed by imports, which ameliorates the shortage, but at a cost – particularly if product needs to be imported from Eastern Europe. A much more satisfactory way to increase supply would be for manufacturers to invest in new capacity in the UK – a difficult decision for multi-nationals to make when the UK housing market is so very exposed to short-term policy shifts.
It will take time to embed such a radical change into the political agenda but in the short term I remain confident of a sustained, if less dramatic, growth in the volume of new houses being built. As manufacturers we are meeting the increased demand for product, whether the labour market can supply sufficient skilled workers, is, of course, another question entirely.