Tuesday, 24 December 2013

Merry Christmas Everybody! wishes all its followers a very Merry Christmas and a prosperous New Year!

Monday, 23 December 2013

Round-up │ 23 December 2013

In Briefing pages: (Economic) Bank of England ups the ante on housing market over-heating fears, warning lenders of potential intervention │ (Industrial and political) Whitehall officials hinting that £600k cap on Help to Buy mortgages could be halved.

Friday, 20 December 2013

Round-up │ 20 December 2013

In Briefing pages: (Economic) housing starts up 30%│(Corporate) Costain PFI sales shows equity secondary market remains healthy

Thursday, 19 December 2013

Round-up │ 19 December 2013

In Briefing pages: (Economic) rumours of the death of cheap money greatly exaggerated, Fed • gross mortgage lending eases in November, but still up 30% y/y │(Industrial and political) alternative investors, including high nets and funds, "flooding into" development finance│( (Corporate) Steady as she goes for Keller • big motorway job for Costain

Wednesday, 18 December 2013

British homes for British buyers?

Housebuilding's status as one of the highest profile political footballs became more entrenched today with the announcement by 11 leading London developers that they would no longer market developments off-plan to foreign investors (mainly Asian) before British buyers get at least an equal crack at the whip.

Under the aegis of the Home Builders Federation, builders including Barratt, Telford and Galliard followed a lead set by the capital's biggest builder, Berkeley, in signing a voluntary pledge that "all new developments will be marketed in the UK before or at least at the same time as abroad".

One can only suppose that the HBF has been at least slightly leaned on by ministers, following headlines in the summer, such as in the FT, that "Foreigners buy nearly 75% of new homes in inner London". This concluded that the trend would "fuel a boom that threatens to freeze out domestic purchasers".

The sensitivity of both politicians to these stories and of housebuilders to incursions by politicians was demonstrated yesterday with the massed howls of protest from builders at Labour's revival of claims that they were "hoarding land".

Will it have an impact on the market? Possibly at the fringes. First of all, one has to question how much impact foreign buyers have. Back in August Knight Frank research found that foreign buyers accounted for 73% of purchases in central London. Today's release from the HBF quotes a figure of 11%, but based on Greater London, it appears.

The HBF argues that pre-selling homes (at least taking deposits) often makes the difference between sites being viable or not and is at pains to dispel the "lights out London myth".

Only time will tell whether housebuilders will market their properties to Asian's less vigorously or merely add UK investors to their mailing lists for off-plan releases. It's doubtful whether they will turn down lucrative foreign customer bases, having worked hard to foster them.

The more worrying implication, following the imposition of Capital Gains Tax on foreign buyers and Labour leader Ed Miliband's sortie into the space, is that politicians are clearly breathing down the necks of housebuilders more than ever (while Bank of England Governor Mark Carney is doing likewise with mortgage lenders). But, as housebuilding history suggests (in this country and further afield), once political leaders start interfering they usually end up making things worse. 


Round-up │ 18 December 2013

In Briefing pages: (Industrial and political) London housebuilders agree not to premarket to foreign off-plan investors before Brits│ (Corporate) Barratt forms JV with housing association L&Q to pursue London growth.

Tuesday, 17 December 2013

Round-up │ 17 December 2013

In Briefing pages: (Industrial and political) "Heathrow heavy" recommendations for SE runway expansion, "Boris Island" on hold, Stansted ruled out • housebuilders fury at Miliband's "hoarding" claims │(Economic) house price inflation hits new high in October, more scrutiny from BoE on way? │ (Corporate) Winkworth cheered by strong London sales and sees more of the same in 2014.

Monday, 16 December 2013

Miliband's 2020 vision. Should have gone to SpecSavers.

Labour leader Ed Miliband isn’t half gearing up for a fight with corporate Britain, should he gain the keys to Number 10 at the next election. First he tells the big energy companies that Labour will freeze electricity prices; now he’s threatening to get heavy with recalcitrant councils that block planning consents and builders that are too sluggish in churning out homes when they get them.

A Labour government would have 200,000 homes a year built in England by 2020 (against 99,440 starts in 2012, 79,270 of them private). In media leak of a sabre-rattling speech today he is reported to be threatening “stick in the mud” councils that oppose more development-friendly neighbours and housebuilders with “use it or lose it” sanctions if they “sit” on their landbanks. (For dramatic effect he was scripted to have a pop at the four largest builders, Barratt, Taylor Wimpey, Persimmon and Berkeley for allowing their profits to go “through the roof”, to the tune of 557% since the Coalition took office.)

Like many other politicians before him, however, Miliband appears to be suffering from restricted vision when it comes to developers’ land banks. Whether or not housebuilders are sitting on empty sites that are fully “good to go” is one issue; how fast they go at it once they actually start is quite another. Trying to speed up either threatens to turn housing sites into legal minefields.

To cloud matters, the definition of what comprises a land bank is extremely hazy. It can include anything from pasture that is a glint in Farmer Giles’ eye, sitting as a forlorn option in a developer’s strategic portfolio, to a fully owned and paid for site with detailed planning permission.  As nebulous are the terms of ownership, should planning consent be granted. Depending on the wording of contracts, a builder may have more compunction to buy land that is “under option” than a site that carries a “conditional contract”, in which a smart developer can wriggle out of if the market turns against it. (Tales of the latter occurring were legion in the depths of the recession).

Trying to judge whether a specific site has had the full green light and making the builder start on it rather than extricating themselves from the option/contract should keep many a lawyer gainfully employed.

What Miliband and the other opponents of “hoarding” don’t appear to have considered is the speed that developers actually build and sell houses when they are actually on site. Builders come in many shapes and sizes, but for the volume players, the rule of thumb for most of the life of big sites has usually been that something between half and one unit sold per site per week works out most profitably: any less and the site becomes an expensive overhead; any more and, blast, you’re undermining your pricing power and margin.

Now, try and recruit an army of site watchers with diaries and tick lists Mr Miliband …

The housebuilders are building more houses, but, despite the swathes of government backing being channelled their way, they appear to have little appetite to return to the 160,000 private starts in 2007.

If Labour wants to really boost housing starts it will have to consider more radical approaches including making “build-to-rent” more feasible, more funding for social housing and, heaven forbid, a return to mass council house building. But there’s only so far the volume housebuilders will go, voluntarily or otherwise.

Round-up │ 16 December 2013

In Briefing pages: (Economic) House prices to swell 6 - 8% more in 2014 (and means the average buyer will need to fork out 3% Stamp Duty), Rightmove • (Industrial and political) Labour to double housebuilding by 2020 by taking on "stick in the mud" councils and "sitting on their mud" housebuilders.

Friday, 13 December 2013

Round-up│ 13 December 2013

In Briefing pages: (Economic) High LTV mortgages double • (Corporate) Bellway reports strong results, with almost a third of sales from Help to Buy • More management turmoil at Morgan Sindall • (Industrial and political) MPs call to put foot down on HS2

Thursday, 12 December 2013

Round-up 12 │ December 2013

In briefing pages: (Industrial) Those pesky EUrocrats could hold up £16bn nuclear plant by a year • housebuilders' bonuses up 78% • Shard hotel delayed by more than six months • rent arrears are the fastest growing debt problem

Construction's dreaming of a White Christmas

This morning’s heavy frost may raise hopes among many in the building industry of a full-on White Christmas, because, at least in business terms, everything’s turning a bit too hot, hot, hot.

I’m told that one housebuilder hailing from the Home Counties has muttered about difficulties in sourcing London Stocks. If said developer didn’t have the excuse of a long cold snap holding up sites, finding the bricks to build any homes on them could become the proverbial pain in the ariss. Brickmakers, as highlighted in my last blog, are going to have to work flat out during what has been for several years a quiet winter in order to rebuild dwindling stocks.

Looming brick shortages aren’t restricted to housebuilders; a large national contractor has been telling its investors “Even if you can find brick layers it is increasingly hard to find bricks”. The latest materials stats from the Department for Business shows brick stocks in October falling to 10.6 weeks worth of deliveries, down by 6% on the previous month, by 37% year-on-year and by a whopping 67% since the 2008 peak of 32 weeks.

Bricks and brickies are just one element in a tightening supply chain highlighted last week in a report by consulting giant Aecom, which focused on the London market. Concrete, joinery, cladding, drylining, mechanical, electrical and plumbing contractors were also cited. (That sounds like most of the stuff that goes into most buildings.)

This reflects rising workloads but also shrinking capacity, with some half a million souls having left the industry since 2008. Aecom’s survey of major players like Laing O’Rourke, Skanska and Lend Lease found that they now have secured 70% of their budgeted orders for 2014, compared with 38% when asked at the same point in 2011, looking into 2012.

Another survey, out yesterday from training body the CITB, shows that 42% of UK construction companies are struggling to recruit staff.

This should inevitably lead to cost inflation and delays. Aecom puts central London tender price inflation at 2-5% for 2014 and 3-6% for 2015. I’m no QS but, if you ask me, even the top end of both ranges look on the light side.

Carillion’s trading statement today emphasised how selective it is in bidding for UK construction work (but also indicating its much vaunted scaling back of this business has run its course). Lawyers for the bigger groups will presumably protected themselves against most litigious flack should prices and delivery times run over budget.

Not so, possibly, for the small and mid-sized firms, that are more likely to take any claims on the chin. I was at an annual industry drinks bash last night that is frequented by an eclectic mix of insurance industry people and smaller builders. One that knows about these things expressed some surprise that more companies hadn’t failed so far; recovery is a notorious time for bankruptcies. It wasn’t that the banks had turned feelier and touchier, he suggested; it was that, starved of back office investment, they hadn’t yet got their acts together to process insolvencies. And his definition of the turnover of a “small” contractor stretched to nine digits.

So, as Dean Martin would put it, let it snow, let it snow, let it snow.

This blog appeared today on

Wednesday, 11 December 2013

Round-up │ 11 December 2013

In briefing pages: (Corporate) Carillion "broadly" in line for year, with signs of end of UK construction retrenchment strategy • (Industrial and political) Interesting and innovative link between social housing provider Places for People with Manchester's city council and pension fund to provide 250 homes

Tuesday, 10 December 2013

Round-up │ 10 December 2013

In Briefing: (Economic) More bubble trouble. RICS sees house price expectations hit 14 year high • It's that man again. Carney warns on housing market hitting "warp speed" • report says a generation will be frozen out of house buying

Friday, 6 December 2013

Round-up │6 December 2013

In Briefing: (Corporate) Berkeley Group outstrips expectations, fuelled by strong London market

Monday, 2 December 2013

Round-up │ 2 December 2013

In Briefing: (Industry) Planning approvals soar as rule change gives developers more clout in appeals