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Housebuilding Market Report – UK 2014-2018 Analysis

  • July 2014
  • -
  • AMA Research
  • -
  • 98 pages

Summary

Table of Contents

AMA Research are pleased to announce the publication of the 11th edition of the report “Housebuilding Market Report – UK 2014-2018 Analysis”. Housebuilding has now risen up the political agenda and, as a result, has generated much media focus in recent years - much of it involving a lack of understanding of the key issues. This report reviews current market developments with prospects through to 2018 and assesses key issues of supply shortfalls, planning and the significant mismatch between supply and demand and its implications on new housebuilding in the medium term.

Key areas in the report:

• Review of Housebuilders – analysis of major housebuilders, volumes, shares, positioning, key housebuilding indicators, industry concentration, changes in 2011-13 and forecasts of future trends.


• Detailed assessment of the market - housing starts and completions 2008-2018, analysis by sector (private/public/self build), mix of houses/apartments, forecasts.


• Government Policies - targets, planning changes, affordable housing programmes, self build, Help to Buy etc. Can we really build 240,000+ homes per annum - and are all the changes really achieving significant results?


• Future Prospects – outlook for 2014-15. Medium term prospects, barriers to growth, 'building what the market needs or wants'.

Areas of particular interest:

• Focus on major changes in housebuilding - forecasts up to 2018.


• Myths and misunderstandings - mismatch of supply and demand - targets, output, private/public sector.


• Government - planning changes, Affordable Housing Programme, funding schemes, Help to Buy etc.


• Industry concentration - increasing share taken by top developers - squeeze of smaller developers, role and prospects for self build.


• How can we build 240,000+ homes per year - who are the 'customers' willing and able to 'buy'?



Companies mentioned in the report include:

A & J Stephen (Builders) Ltd, Abbey New Homes, Argent, Avant Homes, Balfour Beatty, Barratt Developments, Bellway, Berkeley Group, Bewley Homes Plc, Bloor Homes, Bovis Homes Group Plc, CALA, Connolly Homes, Countryside Properties, Crest Nicholson, Croudace Homes Group, Durkan Ltd, Elan Homes, Fairview New Homes, Galliard Homes, Galliford Try Plc, Hill Partnership, Hopkins Homes, Jelson Homes, Keepmoat, Kendrick Homes, Kier Group, Laing O’Rourke, Land Securities, MacTaggart & Mickel, McCarthy & Stone, The Miller Group, MJ Gleeson Group, Morgan Sindall, Morris Homes, Norfolk Homes, Persimmon Plc, Quintain, Redrow Group, Scotia Homes, Shepherd Homes, Stewart Milne Group, Strata Homes, Taylor Wimpey Plc, Telford Homes, Tulloch Homes Group, Wainhomes, Weston Homes Plc, Willmott Dixon

The report covers the following key areas:

HOUSEBUILDERS

• Overall market size, number of builders, analysis of key changes in recent years.


• Analysis of market shares of leading housebuilders - key players, comparisons of changing shares - market concentration and squeeze on smaller developers.


• Major review of leading national housebuilders - analysis of key indicators for UK housebuilding (completions, turnover, private/affordable mixes, apartments etc. where available), recent trends, current market position etc.


• Rationalisation of industry structure, mergers & aquisitions, review of leading commercial developers in housebuilding, impact of new entrants, future prospects.


• Review of leading regional and local housebuilders, recent corporate activity. Analysis covering turnover, pre-tax profit, completions.


HOUSEBUILDING MARKET

• Current market conditions, overview of housebuilding during 2012 - 2014.


• Myths and misunderstandings - mismatch of supply and demand - targets, output, private/public sector, location etc.


• Analysis by sector - private, public, self build - volumes, changing market mix, factors influencing the market, future trends. Self build volumes and forecasts up to 2021.


• New housing starts and completions - trends since 2008, review of market volatility in recent years, forecasts up to 2016. Changes in net housing supply 2006-13 (new build, conversions, demolitions etc.)


• Analysis of completions for public/private sectors by region, impact of affordable housing market.


• Mix of flats and traditional housing - rapid growth in volumes of flats now reversed, share changes 2002 - 2013, future prospects - where do we go from here?


• Market structure - stock of buildings in UK, ownership structure, housing stock by age of dwelling, average property prices, residential property transactions.


• Factors influencing the housing market - Help to Buy, Affordable Housing Programme, review of planning system, household projections, net immigration/ household formations.


• Overview of factors influencing the use of MMC - product review of OSM/MMC - timber, steel frames, concrete - market volumes, mix (private/affordable) and trends etc.


FORECASTS - SHORT & LONGER TERM PROSPECTS

• Forecasts of starts and completions 2014-2018 - market volatility, short term prospects for 2014/15. Long term prospects for the sector - rate of market recovery from downturn.


• Coalition Government - impact of Comprehensive Spending Review, Affordable Housing Programme/budgets, planning etc.


• Net Additional Housing - review of housing targets in England, review of confusion over new housebuilding and net additional housing (including conversions and change of use).


• Can we really build 240,000+ homes per annum - and are all the changes achieving significant results?

Housebuilding has no risen up the political agenda and, as a result, has generated much media focus in recent years – much of it involving a lack of understanding of the key issues. Although market is currently seeing increased growth driven by low interest rates, increased demand following a period of low transactions and improved economic conditions, there remains a significant mismatch between supply and demand.

Housing starts and completions are forecast to experience good growth in the short-term as increased demand follows through from improving consumer confidence and mortgage lending, with more good rates of growth forecast into the medium-term. The private sector remains the key driver for residential growth. The volume of housing starts is estimated to rise in the UK by around 14% in 2013-14 followed by more modest growth rates during the 2015-2018 period. Housing completions should follow a similar pattern - growth rates of 12% are forecast for 2013-14, after which completions are expected to increase by between 2% and 11% per annum until 2017-18.

In the short term, output is set to increase, but the level of uncertainty increases into the medium term as growth is likely to be tempered by anticipated rises in interest rates – perhaps by as early as late 2014 - which will begin to affect affordability and mortgage lending. Also concerns are currently being raised concerning financial assistance schemes such as Help to Buy and their potential to ‘over-heat’ the housing market. The chronic undersupply of new homes in the UK is well documented and it has now become clear that housing targets set in 2010 by the previous government of 240,000 new homes per year are not being met – by a substantial margin.
The main reasons for this underperformance that continue to constrain housebuilding volumes have been planning constraints and delays, a lack of materials and labour shortages and scarcity of available land especially in the Southeast, together with a lack of funds for mortgages and much stricter lending criteria, particularly for first time buyers.

In the medium-term, confidence has returned to the housing market with demand for private sector new housing underpinned by increases in average prices and confidence returning to the mortgage lending sector. However, there are now concerns that rapidly rising house prices and a booming market could lead to a ‘housing bubble’ posing a threat to long-term financial stability. There are now calls for Help to Buy to be scaled back to prevent the housing market from ‘over heating’ and the Bank of England is considering providing advice on "changing the terms" of the scheme as well as limiting the amounts of certain types of mortgages that banks could undertake.

Over the last 25 years, the housebuilding supply sector has also experienced significant structural changes influencing the delivery of new homes. The uncertainty, cost and complexity of the planning system undoubtedly led to a consolidation in the industry as the larger developers attempted to secure sustainable land banks. The impact of the downturn affecting the housebuilding industry in 2008 and 2009 disproportionately hit small and medium house builders causing substantial losses among a number of companies. The main problems of obtaining finance have been much greater for many medium sized and smaller firms than has been the case for the major housebuilders – many of whom were able to raise new capital over that period.

As a result, since the downturn, the number of smaller and medium sized housebuilders has contracted at a much faster rate than the volume housebuilders and this decline has accelerated over the past 5 years, as large numbers of firms have either gone out of business or have diversified out of building homes altogether. By contrast, the number of larger housebuilders, building over 500 units a year, has remained more stable, declining at a much slower rate. The volume builders have begun to experience healthy levels of recovery over the last 18 months - 2 years and there has been a substantial turn in the market back towards larger builders.

Despite completion levels increasing for the volume housebuilders in 2013, over the next few years the larger firms are expected to target sustained growth over short-term volumes. In addition, many of the volume housebuilders are indicating labour and material shortages as major concerns in 2014, with materials prices expected to rise by up to 5% this year.

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