The private housing sector has played a big part in architects’ economic recovery but it now looks vulnerable, writes Will Hurst
Are architects dangerously reliant on the private housing sector? They’re certainly reliant on it because this line of work remains the most buoyant in the RIBA’s monthly Future Trends survey on anticipated workloads and the one primarily driving demand for architects’ services along with a remarkable boom in fees. But there is now every reason to believe this dependency could be hazardous given the signs of a housing market slowdown if not a crash on the horizon.
In various parts of the country and in London in particular, it’s easy to think that house prices will just rise and rise even without considering how prices have gone up faster than inflation for the past two decades. Just look at the underlying factors such as the UK’s persistently low interest rates (now not expected to even begin rising until early 2017), rapid population growth, and industry and government’s long-running failure to seriously boost the supply of homes. These drivers, combined with an influx of foreign cash, have resulted in seemingly insatiable demand in the capital particularly at the high end of the market. To give just two examples: a penthouse at Rogers Stirk Harbour’s Neo Bankside was recently put on the market for a breathtaking £20 million; while this week it emerged that a dilapidated 1950s pre-fab in Peckham resembling a shed had been auctioned off for just under £1 million.
But shouldn’t these outlandish examples make us think this growth is unsustainable and that a property price bubble is about to pop at the expense of architects? Only yesterday, Britain’s biggest estate agent Countrywide issued a profit warning which sent its share price plummeting 12 per cent and hit shares at volume housebuilders including Barratt, Taylor Wimpey and the Berkeley Group. The reason seems to have been the company’s expectations of a post-election ‘bounce’ in the housing market which simply failed to materialise, prompting fears of a prolonged slow-down. Countrywide’s chief financial officer Jim Clarke said: ‘Every time there is an election, the property market slows down, then there is a bounce afterwards. This is the first time since 1983 that it has not happened.’
It’s the first time since 1983 that a post-election bounce has not happened
While experts are predictably divided on the outlook for house prices, with some forecasting continued growth, UBS bank has released research suggesting London has the most overpriced housing in the world and faces a 95 per cent chance of a ‘correction’ in prices of at least 30 per cent over the next five years. And academics at Lancaster University recently published a report highlighting how housing in the capital was far outstripping wage rises. While they did not believe there was bubble at present, they concluded London may be on the cusp of one, and that prices were so high there was ‘a risk they will crash’, a scenario that would cause at least a major slowdown across the UK.
The simple message architects should take away is to avoid letting your practice become too heavily invested in this buoyant but volatile sector.