This blog was originally started 4 years ago this coming week. One of its key aims was to watch and discuss the intersection of business and politics. In the United Kingdom, a Labour Government together with the strongly interfering European Union was stifling and controlling business in a way that had not been done for 30 years.
However, here we are a few years later and the Government has changed and with it, in some ways, the intersect. For the new Government is going to cut Public Sector spending and this will have a big effect on changing the dynamic of the private economy. The bigger the cuts, the more the change.
One good example has struck me this week. Private Housebuilders did not have a good recession, rights issues, collapses the sector saw the worst of the crash. Even some of the big companies like Taylor Wimpey had a close call. They have downsized their build plans and are now sitting on landbanks. Looking at some of the results this week, the corner has been turned.
But actually, there is a massive buying opportunity here for residential housebuilders. The Government is going to cut the budgets for social housing, it must do. Instead it will try and encourage more private building. We also know the planning laws in the UK are amongst the strictest in the world, which is why commercial property returns where building is easier, are nowhere close to residential returns.
Now the country needs new houses as the population is growing rapidly. 200,000 a year, but we are at half that level and have been for some time. This effect, according to the Barker report, will take time to feed into property prices. But it will, along with higher interest rates. For housebuilders, higher prices are nice, but really they need more volume - this shortage of houses coupled with the Government cutbacks presents an ideal market for the next 5 years or so. They can gear up to build more and know that supply is so limited that it will always meet the demand, even if we have sclerotic growth in the meantime. They may even pick up a few public sector contracts if the Government decides instead to get serious about social housing.
The FTSE, although toppy for the summer, is not close to all time highs and taking a long view, the residential property sector must be one to look at.
15 comments:
The only real improvement in house building will be if the companies decide to embrace new methods of building. e.g. factory constructed units that are fitted together on site - it would cut the on site work to a few days to produce a house.
Ivan,
As someone who's worked in the construction industry for 13 years I can tell you that the quality of workmanship and materials used in the UK housing industry is lamentable (something akin to when we used to make cars...when we weren't on strike). Take a look at other comparable countries and you'll see that both materials and workmanship is much superior. The UK does not have a great track record on quality manufacturing - maybe on pure numbers, but not on quality.
To take the building process even further away from the end product will not have a positive effect as you'll then have two sets of people who don't give a damn about the finished product. The products may look great in the trade literature and the concept expos but you think about the guys in the factory on minimum wage and then the guys on site with a lard butty in one hand and a fag in the other.
Commercial and industrial projects do have similar problems but the clients and the amount of money, reward, and pentalties (both moetary and reputationally) are slightly different.
As an afterthought...Take a look at our first go at pre-fabs. While they may have been necessary at the time, they're some of the worst buildings ever produced by mankind.
(Apologies to Ivan. I wasn't having a pop, I just got on a roll).
You may both be correct.
I am sure it is just a matter of time before Persimmon can spec and buy a house made in Germany, have it shipped over in one container, and have it built and finished in 2 days by some skilled eastern europeans.
Just a cheaper version of a huf haus
as I understand it, it is mainly planning regs and councils that are against this approach - which is after all what spawned mcmansions in the US?
Amongst the myriad smaller builders in Britain fine workmanship can be found. I build in both America and England with both countries having their faults but by and large English houses are of superior quality.
Happy birthday!
thanks for dropping by !
Thud, I totally agree; I was more referring to the big house builders who construct tens of thousands of properties rather than the smaller local builders who rely on reputation and - generally - have to pride in their work. (Although you can easily find horror stories everywhere, obviously).
You have to remember, while planning and building regs are fantastic in the UK if you take into account every other country in the world, they are only minimum standards; and, while those houses built en-mass are also a step up in the history of the UK if you hark back to estates of terraces and back-to-backs, if you compare them to the houses built en-mass in Australia (which are aesthetically the same buildings), you'll find the quality of materials and workmanship far poorer over here.
I think a country with population increasing at a rate of 200k pa whilst drastic public service cuts are in the offing (not to mention a head-in-sand energy policy) is lining up for trouble.
Electro-Kevin, Agree. But I fancy the solution is to arrest immigration.
Sadly that won't happen under the Clegerons, so we individually ought to prepare for trouble.
The thing stopping us having lots of nice Swedish kit houses is planning; if a design could be given type approval so that planning only concerned siting, that would be a step forward.
I'm sorry, I should have mentioned the planning department problems - I ran into them 20 odd years ago when I wanted to build a timber frame house for myself. They kept on insisting it wasn't 'traditional' construction and didn't fit their 'regulations' for things like insulation - they wanted 4 inches of insulation, I wanted 8.
Until the planning aspect and materials problems are sorted out there will not be any advance in the number of houses constructed per year.
What's noticeable is how cramped even high-end new housing is. Exotic new flats in Canary Wharf often have minuscule bedrooms. What I can't understand is why there is such high demand for poor housing when better-quality alternatives lie a stone's throw away.
"For the new Government is going to cut Public Sector spending ..."
Har di har har. Even the Cleggerons won't cut overall government spending - it is planned to go up over the next few years, not down.
And as for housing, shouldn't we ask the customer, not the government, the planners, or the housebuilders?
Was out with a local planning bod recently in a conservation area and was very impressed.
The council were trying to get the planners to actually look at the existing environment. Pitch of roof, position of guttering , height of wall etc.
He wasn't trying to get them to change materials or size but the extra detail that the architects use in modular design.
This was a rural area so the building firm was using 'rural dwelling 4bd exec No.1' design.
The planner showed that the decorative porch does not appear on any other house. the old roofs are conversions from thatch and have a much greater pitch than normal.
Most homes have a 3 ft high wall, not 5 ft and so on.
Was very interesting as applied to building in existing locations.
He said with new estates they don't care what the builders do with design as its all new.
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