Opportunity knocks for independent merchants
Published: 21 June, 2013
Garry McDonald from housebuilder Miller Homes posed the question of whether the construction and housebuilding sector is actually fit for a recovery.
The government's projected annual housebuilding figure is for 240,000 houses to be built every year, he said, and while this has recently been adjusted down to 210,000, he said the real figures now being built fall far short, with only 111,000 new homes built in 2010/11.
The government's aim was to achieve 2.2 million houses by 2021, which he said the industry was currently missing by a mile, but Mr McDonald asked whether, even if we could now achieve this, whether the supply chain was ready?
In recent weeks, he said, lead times for bricks have gone from one week to a six-week lead time, and this is about to be increased to 10 weeks, making it, he said, "very difficult for housebuilders to run their businesses".
Other constraints on housebuilding and general construction are well known, and include mortgage availability, consumer confidence, an uncertain economy and the affordability of the homes themselves.
But Mr McDonald noted that government intervention with schemes like Funding 4 Lending, Help to Buy and New Buy are now starting to have an effect, and he genuinely believes that Help to Buy is going to be "a game-changer".
This is all going to take some time to make a real change however, he said, with 2013 likely to be difficult, even though there has been a consistent impetus in the market since Help to Buy was brought in. He believes it will be 2015 before a real improvement is seen, as predicted by a recent Savills Forecast.
A change of philosophy
Miller Homes itself is one of the top 10 housebuilders in the country, and a five-star housebuilder according to the Home Building Federation.
The company sets out to differentiate itself from the competition with what it describes as The Miller Difference, focusing on the emotional experience of its customers as they purchase their homes. As a result, 97.2% of its customers said they would recommend the housebuilder.
As part of this difference it created a high-quality retail feel to all its sales branches and literature and upgraded the specifications of its kitchens and bathrooms. "It's all about giving the customers what they want," he said, adding that the company also strives to be the planners' developer of choice.
Mr McDonald asked the delegates what the Miller Difference of their company was, and how they differentiated themselves from their competitors.
He noted that Miller Homes has a £30m budget to spend with merchants every year. Of that £5.5m is spent on plumbing and heating in particular, and £2m on plastering.
Mr McDonald noted that the housebuilder needs consistency in everything it delivers and, although much of that budget currently goes through national merchant chains, he asked whether independent merchants could consistently work with developers as well as the national merchants do.
When polled on this question, 35% said yes, 57% said yes if some changes were made, and only 8% said no. This, Mr McDonald said, was great to see and a promising sign for the future of the industry and for the partnerships independent merchants can make with national housebuilders.
Mr McDonald concluded by saying that he has no doubt the market will recover, the supply chain will then be under increased pressure and housebuilders will have to drive value for their businesses.