Cliff Fudge, technical director at H+H, analyses the house building market for 2015 and discusses the need for SME house builders to get building again and the help they need from all stakeholders in the sector.
We’re already a month into the New Year and unsurprisingly it has been a month of predictions, statistics and promises. Housebuilding looks set to continue to be the focal point of the construction industry around which everything else happens and on which all discussions are based.
Looking back at this time last year there were various sets of predictions published by those in the know, all of which seemed to be around the figure of 155,448 housing starts. The final figures from the Government or the NHBC are, at the time of writing, yet to be released however, I can safely say it was a busy year for material manufacturers. Last year was about finding the balance between continuing to service and work closely with long term partners whilst still ensuring that new customers could come on board.
From what I have seen and heard about this year I think it is safe to say that it will be no worse than last year and could potentially be better. Going by the conversations we have been having with customers and the figures we have seen so far it looks like we are in for a steadily positive year ahead, this is despite the election which often brings with it a raft of uncertainty.
The figures from the volume builders so far are all looking positive: Barratt witnessed an increase of 12.5% in completions in the six months leading up to December and is planning on opening 90 new sites in the next six months; Taylor Wimpey reported a year on year increase of 6% in completions and Persimmon a 17% increase taking the total number of legal completions for the company to 13,509.
As yet none of the major house builders or organisations in the know, such as the Construction Products Association, have predicted massive increases in the number of houses being built this year. Some may take a pessimistic view of this and say that it shows a slowdown, however, I prefer to be more optimistic. I believe that the predictions we have seen so far from the volume builders actually show that they are in a good position with a strong business model; slow but steady increases are what the market needs, not the volatile up and down activity we are usually subjected to.
Despite the predicted increases in activity the number of houses being built this year will still fall far short of 200,000. This is the magic number banded around by politicians when it comes to setting a target for house building activity. There is a missing link in the chain and for me that missing link is SME house builders.
We do not hear much from or about this sector of the market. It has been the slowest at coming out of and recovering from the down turn and is far from building the number of houses it has done in the past. According to the Federation of Master Builders (FMB) the trade body for SME builders, small house builders used to build two thirds of all new homes but are now building just over a quarter. Confidence is low in this sector as it has had its fingers well and truly burned in the past. This is something that all stakeholders within the sector need to address; we need to collectively help these builders get back on site building houses again.
One of the biggest issues faced by the SME builders is the need to find land, obtain funding and planning permission. It is no secret that there are still issues when it comes to lending to small businesses, and builders are no exception to this despite the emphasis placed on the sector by the Government. Last year the Labour Party proposed the ‘Help to Build’ scheme which would provide government guarantee for loans to SME house builders, a sort of sister scheme to the Conservative’s Help to Buy which has helped to increase demand for new houses.
The FMB is in full support of this initiative with Brian Berry the chief executive saying: “the ‘Help to Build’ idea being put forward by Labour is the most far-reaching solution to have emerged so far. This is an idea which could re-invigorate the SME house building sector and we hope the policy is implemented by whichever party forms the next government after the General Election.”
With regards to finding land and subsequently obtaining planning permission, this is an area that SME builders have always found challenging. Volume builders can sit on land banks with planning permission for upwards of 10 years as part of their forward planning but this is not possible for the smaller builders due to the cost implications. Instead they more often than not have to buy land and apply for planning permission as and when they are ready to build, all of which can be a long drawn out process during which time the builder is unable to build.
To help with this, the current Government is looking to pass a bill relating to Housing Standards before the general election. This would outline a set of standards chosen optionally by Planning Authorities that would apply to house builders in their areas of the country and combat the problem of builders being subjected to different planning regulations in different planning areas.
If this comes into law there will be a prominent role for merchants and manufacturers to play with regards to producing and disseminating information that can help the small builders meet these standards if they are required.
Another implication of the approval process faced by the small house builders is that they are the first to be hit when new tougher building regulations and legislation come into play. More often than not these involve an increase in the cost of the build process and additional outlays such as consultants and training. This is a problem that the volume builders avoid because of how far in advance they apply for and are granted planning permission and building regulation approval.
The way we at H+H and other manufacturers in the masonry sector are trying to help is by working with industry bodies such as the NHBC to develop and update guidance literature for regulatory approvals, with the idea being that if the builders follow these notes they will be compliant.
Similarly the Local Authority Building Control now have masonry Registered Construction Details on its website which allows builders to see what products and designers comply with the latest regulations, saving them time and money. The volume and regional builders do not need to worry about this as they generally have dedicated technical teams.
At H+H we have developed a new technical support package to help smaller building contractors. The Masonry House Package is designed to take the hassle and worry out of building the fundamental elements of a build project – the walls and foundations. It includes technical advice, detailed product specification and the supply of vital masonry related products required for the build. Packages like this give advice to small builders to ensure that their homes are complaint with all the latest legislation.
There is also the issue of the apparent product shortages. In the past year H+H has had no problem with meeting the demand from its customers however the same cannot be said for all material manufacturers. This is a story that has broken the realms of the traditional trade media and made its way into the national news agenda. When this happens it is guaranteed to have an effect on those it impacts. In some cases the stories were exaggerated and could be deemed as scaremongering but regardless, it has made small builders think there is a problem and could be a contributory factor to them not even attempting to build new houses, they see it as another stumbling block in their way.
This is where the merchant can help the SME builders.
When it comes to the issue of product shortages merchants need to be telling their customers when they have product in stock. I know that throughout 2014 merchants were fully supplied with Celcon Blocks but yet we were hearing that small builders thought there was a shortage. It is important that merchants are communicating regularly with not just the customers that come into the branches on a weekly basis but with those who are on their databases who they haven’t seen in some time.
The larger merchant groups have in recent years started to recognise that they are now more than a distributor of product; they are a vital link in the supply chain and can in fact add real value when it comes to assisting and advising small house builders. This is a role all merchants need to be playing, not just the big national groups, it is about offering a full package and service.
Merchants can help by directing the builders to the available guidance, passing on the technical information form merchants and learning about all of the new regulations themselves in order to offer advice on the shop floor. It is unlikely that a small house builder will be aware of even half of the help that is available to them when it comes to complying with Building Regulations; this is where the role of the merchant comes in.
Manufacturers have relationships with the large volume builders but it is unlikely that they have direct contact with the smaller builders so they rely very much on the merchant being the go between and passing on information about the help and advice that is available.
It is important that all stakeholders in the industry work closely together to give the SME house builders the confidence they need to return to building new houses. It is about having continued engagement with them on the issues that are affecting them the most and finding a solution to solve the problems.
SME house builders may be the missing link in reaching the 200,000 new homes target but merchants along with manufacturers and the Government are key to that link being formed.