Private housing hits five-year high as architects' confidence in sector grows
Private new-build housing registrations in the UK have reached their highest level since early 2008 - an increase mirrored in new RIBA figures
Nearly 14,000 homes were registered in May this year, according to figures released by the National House-Building Council (NHBC), a sign analysts are interpreting as a resurgence in major housebuilders’ confidence. This compares with 11,484 in April and just 9,232 in May last year (2012).
Meanwhile the RIBA’s monthly Future Trends Survey for May revealed that practices predicted a significant increase in private housing workloads (the May 2013 index figure for the sector was +23 compared with +16 in April).
The institute’s director of practice, Adrian Dobson, said that, though overall prospects for the profession had marginally dropped for a second month in a row (May 2013 to +12, down from +16 in April 2013) ‘the bespoke housing sector continues to remain robust, indeed to be very strong in some locations.’
The NHBC data showed that about two-thirds of the homes were registered by the private sector and 4,500 by the public sector – the fourth highest month for public builds since 2004.
Discounting June 2011, the combined public and private figure for registered new-build homes is at its highest level since November 2007.
The news comes after major housebuilders Crest Nicholson and Berkeley Group posted bumper results.
Crest Nicholson’s half-year to April 2013 saw revenue jump 39 per cent to £192 million, up from £138.6 million in the same period of 2012.
Operating profit rose 60 per cent to £28.9 million, up from £13.1 million in 2012.
Crest Nicholson group board director Chris Tinker said he expected the top 20 housebuilders to continue to grow at 10 to 15 per cent annually, but that this was being offset by smaller firms, which had been shrinking for about 12 months.
‘It’s fair to say the industry has a growing confidence that it can sustain a higher rate of sale,’ he told the AJ’s sister title, Construction News.
‘Whether we [as an industry] produce that as extra output depends on whether the small builders continue to shrink.’
SME housebuilders have been plagued by access to finance and balance sheet issues, but Tinker said he hoped the government’s Help to Buy initiative, announced in the Budget, would help stimulate demand for housebuilders across the board.
He put the strong selling season down to government mortgage initiatives, including Help to Buy, Funding for Lending, NewBuy and FirstBuy, which increased availability and lender competition.
Tinker added that Crest Nicholson was aiming to regain its pre-recession output of 2,500 units annually within the next three years, after turning out 1,882 in 2012 and 1,520 in 2011.
Berkeley Homes meanwhile saw operating profit after exceptional items jump 23.7 per cent to £280.1 million in its full-year results to 30 April 2013, up from £226.4 million in 2012.
At the same time, revenue rose 31.8 per cent from £1.04 billion in 2012 to £1.37 billion in 2013.
Berkeley chairman Tony Pidgley said: ‘The growth in earnings this year is a direct result of a period of sustained investment since early 2009, during which Berkeley has committed over £1 billion to new land and £2.4 billion to construction, and completed more than 12,000 new homes in London and the South of England.’
NHBC commercial director Richard Tamayo told Construction News that small registered providers and builders had historically taken greater shares as the market grew, but this time it was ‘difficult to imagine’ they could overcome their issues with project financing.
‘It is an upturn, but the context is that we were plumbing lows we had never seen before outside of wartime in this country,’ he said.
‘The majors are looking at expanding numbers – you could do 10 per cent growth per year for many years and still not really be making a dent in where we need to get to.’
EC Harris head of residential Mark Farmer said there was an ‘element of resurgence’ in market sentiment and growing financial strength, with sales cautiously rising as expectations grow.
‘[Major builders are] not necessarily all about massive increases in volume – they’re really protecting their cash position,’ he said. ‘Most people are absolutely paranoid about not repeating the mistakes of the past.
‘You won’t be seeing the massive oversupply problems we were having before. They won’t be opening new developments; if they are they’ll be multi-phasing them so they can stop and start at any point.’
Savills director of residential Susan Emmitt said: ‘Things are improving but from a really, really low base,” but she added that the public sector was waiting ‘with bated breath’ for details of what new funding would be made available.
‘The market remains massively fragmented. Generally positive average figures mask a whole load of variations,’ she said.
Social housing ‘micro boom’
Thames Valley Housing development director Mark Allnutt warned that many registered providers were boosting figures temporarily as they nervously rushed to meet 2015 funding cliffs.
Under Affordable Homes Programme rules, £4.5 billion is being pumped into the social sector from 2011 to 2015, but housing associations risk losing their funding if they don’t meet completion targets by May 2015.
This led United House managing director Colin Forrest to tell Construction News last week that a ‘micro boom’ had been created in the social sector.
Industry sources expect the sector to cool again between September this year and January 2014.
Hopes have also been pinned on the spending review, which is expected to contain details of how social rents will be calculated and new-build programmes funded.
However, Mr Allnutt said the private sector growth was more sustainable, adding: ‘We could look back on this moment as the point at which the recovery really started.’
Mr Farmer said that while growth was buoyant in the South East, where a third of new builds were registered, large swathes of the country still operated ‘dysfunctional’ markets, while in 2006 registrations were spread around the UK.
He said: ‘I think it’s staged. What you’ve got is the beginning of a recovery, but it’s localised.’
Other major housebuilders have more optimistic regional plans, with Willmott Dixon planning a northern expansion, using a number of national frameworks as a base.
Willmott Dixon’s housing business chief operating officer, Charlie Scherer, said the firm had ‘real confidence’ it could ‘grow significantly’ over the next few years, and recently hired a new operations director and sales and marketing manager to boost prospects in the region.