Bucking the Building Blues – March 2018

building housesYou could be forgiven for thinking that the building industry is facing a difficult time at the moment. With Brexit looming, the economic uncertainty should be adversely affecting new building projects.

And, as skilled Eastern European workers, concerned about their future in the UK, head home, there is also a diminishing pool of experienced builders. The weak pound has increased the cost of imported building materials by 3% and the costs are continuing to climb. That is, of course, if you can get the building materials. Lead times for construction materials has lengthened from a few weeks to a few months.

In the case of roofing tiles, a six-month wait is not unusual. And, following the Grenfell Tower tragedy, sourcing fire-resistant cladding has led to an increased demand for bricks. All these issues together should indicate a tough time across the construction industry. However, one developer, Bellway, is forecasting that it will break the 10,000 barrier for building new homes this year.

A clear focus

Recognising that London is a unique bubble, with its higher house prices coupled with a decreasing demand, Bellway had focused mainly on the lower to middle range of the housing market. Geographically, they’ve concentrated on Outer London areas, as well as spreading themselves nationwide. They are currently building in Scotland, Manchester and the Midlands. Their national coverage, in conjunction with more affordable pricing has led to a full order book for the year. The average market price for a Bellway home is around £276,000 and, in the first half of its financial year, it sold nearly 5,000 homes. This is an increase of just over 6% over the same time last year.

Substantial orders

Although not maintaining a strong presence in London, Bellway has developed high-end housing at ‘The Residence’ in Battersea. Over 500 of the homes have already been purchased, with only 100 apartments left to be sold before construction is complete.

John Watson, Chief Executive of the Newcastle-based developer explained:
“Bellway has invested significantly in land to enable continual growth. In our main market place (of low to medium priced homes) demand is robust and mortgage availability is good. We feel that our substantial order book, in conjunction with this encouraging trading environment, should make it possible for us to complete at least 10,000 new homes this year.”

Nationwide trend

Countrywide, house prices have grown steadily, with London and the North East at the lower end, with a 2.1% increase and a 0.7% increase, respectively. Nationwide growth has dropped slightly, from 5% last month to 4.9% this month. The average house price fell by a modest 0.3% to around £226,000. But despite this downward trend in house prices and the continuing uncertainty over Brexit and it repercussions, it appears that it is possible to buck the trend. The key is to focus on the markets with the most demand, investing in land in those areas. It’s good to know that, in a challenging time for the housing market, profitable development is still achievable.

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