4 INDUSTRY NEWS
HOUSEBUILDER & DEVELOPER
Publisher Lesley Mayo
James Parker
FROM THE EDITOR
The Purchasing Managers Index results for August reported a strong rise in housebuilding activity, defying materials cost rises, increasing concerns around Brexit and labour, and poor performance across construction. Industrial and commercial sector work is dropping off, so why does housebuilding keep doing so well?
One answer of course is that demand is never going to abate, we are way short of the 250,000 homes per year target. But there is also inherent resilience in the housebuilding sector shown by the recent figures, and commented on by the FMB’s Brian Berry recently. Despite concerns rising over the cost of imported materials as the pound stays weak, housebuilders have absorbed a drop in margins, and not yet passed it onto their customers.
This was the finding of the Construction Products Association’s most recent Construction Trade Survey. While 88 per cent of main contractors said they had seen materials costs rise in Q2, almost half “opted to keep tender prices unchanged, leading to a fall in margins”. Despite this, Q2 was the 17th consecutive quarter of growth for the industry, led by housebuilding. This has to mean that major housebuilders are working lean and mean to squeeze out profits where they can, as well as working smart to ensure they only build where it’s most financially sensible to do so.
ON THE COVER
Brian Berry: growth in the self-build market will be good for housebuilders
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JV delivers homes quick for Alice in Wonderland scheme in Daresbury
Patrick Mooney: Improvements can be made without waiting for Grenfell inquiry
But how much longer can this last? If the pound continues on its weaker trajectory for the forseeable future, as many predict, then materials imports will become more expensive. Eventually either housebuilders put up their prices, or are forced into a break-even or worse situation, seeing their profits drop as prices fall. That has echoes of the last recession and will not be where they want to look for savings.
HOUSEBUILDING DRIVES FORWARD Starts at highest level since 2008, but major challenges remain with price growth slowing
and political uncertainties continuing to dominate
In a comment piece on page 20 of this issue Lisa Richardson of Knauf Insulation quotes ONS figures that 62 per cent of UK building materials are imported from the EU, rising costs are only going to be exacerbated if tariffs are imposed after a ‘hard’ Brexit. One commentator from the surveying side of the business (Andrew McFarlane of DM Hall) recently said that many UK suppliers are “actively seeking alternatives to traditional markets” to combat the price increases. Will this mean more UK product manufacturers getting a look in? Or with firms such as brick suppliers struggling to absorb energy price increases will it be more cheap imports from far-flung corners of the globe, flooding the market with inferior, but labelled ‘equivalent’ alternatives?
Project: Dalston Lane, Hackney Architect: Waugh Thistleton Structural Engineer: Ramboll Structural Frame Provider: B & K Structures
WWW.HBDONLINE.CO.UK
Price rises of up to 35 per cent in essential construction materials have been reported this year, and components such as plasterboard and insulation are reportedly rising at their fastest rate in 25 years. If this pattern continues, something will have to give.
James Parker
Managing Editor James Parker
Assistant Editor Jack Wooler
Editorial Assistants Roseanne Field
Senior Sales Executives Sheehan Edmonds Nathan Hunt
Sales Executives Suzanne Easter Kim Friend
Studio Manager Mikey Pooley
Production Assistants Shelley Collyer Carmen Simpson
Audience Development Manager Jane Spice
Managing Director Simon Reed
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