Challenges ahead in the housebuilder sector?

on 09 August, 2017

It is perhaps not surprising that the positivity of purchasing managers has fallen since the election. We are in politically unchartered territory and uncertainty is highly contagious. However, at H+H, where our sales are very closely associated with the housebuilding sector, we remain confident of strong demand.

Housebuilding numbers are still rising, with the National House Building Council (NHBC) reporting an increase in 11% of new house registrations in the rolling quarter to May 2017 over the same period in 2016.

Those same MARKIT figures also show that housebuilding activity rose in June by the second-fastest rate since December 2015.

Our own interpretation of the market conditions suggests that the rate of housebuilding is increasing steadily, albeit that the rate is perhaps not as meteoric as it was this time last year.

It is possible to speculate that this tempering of growth is to do as much with supply-side constraints as it is with any slow-down in demand.

And it is on the basis of demand that my confidence in the sector remains secure. We still have a shortage of housing supply. That shortage is most acutely felt by the increasingly politically active and influential millennials desperate for decent quality housing.

With the average house price now running at 7.6 times the average salary (around twice what it was 20 years ago), the private sector housing market is heavily dependent on government support.

This support is assured until 2021 with the Help to Buy scheme. What happens after that is open to question.

My own view is that there will be no option but to increase the supply of affordable housing. This trend is already evident. Those NHBC statistics show that, while private sector registrations increased by 4% in the quarter ending May 2017, the equivalent figure in the affordable sector was 32%, largely as a result of Housing Associations increasing their rates of development for range of ownership options including market rent, private sales and shared ownership.

I believe this is the start of a change in direction for the UK government. If the 2017 election revealed anything at all it was the importance of younger voters – and housing appears very high on the agenda for that group.

While it is difficult for a Conservative government – and particularly one with a wafer-thin majority – to invest directly in public sector housing, it was reassuring to see Communities Secretary Sajid Javid confirming the £2.3 billion Housing Infrastructure Fund, designed to pave the way for increased housing development.

If, and when, another election is called, I would be very surprised if housing was not high on the agenda with the distinct possibility of the major parties vying to deliver housing numbers and this time being more acutely aware of the need to deliver on those promises.

So, while there are interesting and challenging times ahead, we at H+H continue with our investment programme, confident that our new product solutions and improved production facilities will be needed to cope with demand in the medium and longer term.

Calum Forsyth is managing director at H+H.

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