Expert analysis: Nearing the peak
Mark Farmer, chief executive of Cast and author of government-commissioned review into the construction sector
That housebuilding is at its highest level in nearly a decade is welcome news, but perhaps masks more worrying structural issues that may define what could happen in the next year or two. Firstly, there is a growing risk we are at or near the peak of private for sale homebuilding starts in this current cycle.
The growing correction in new private starts in London alone will undoubtedly impact on future national figures as the housing for sale market cools, driven by slackening domestic and international retail investor demand and the basic affordability imbalance for both mortgages and rents really starting to bite. This raises the urgency of how quickly the government can act to maintain overall output as high as possible through a different tenure mix and putting into action its Housing White Paper strategy regarding market diversification.
The ability to stimulate counter-cyclical demand, as highlighted in my government review, is likely to become a key priority for government and for the construction industry. This is particularly true for the GLA in London that risks reducing homebuilding numbers set against unprecedented need.
There will be a need to maximise the additionality opportunity presented by the build-to-rent sector, as well as focusing on bringing forward affordable and intermediate delivery via major registered providers and local authorities. The construction industry’s capacity to deliver has already been overshot, so the strategic imperative to modernise construction is now more important than ever to ensure that delivery in all sectors is to a high quality and we also continue to build the extra, more productive capacity to support the political objective of delivering at higher overall levels of output across all tenures.
Expert analysis: Move past short-term politicking
Neal Hudson, independent analyst, Residential Analysts
Today’s housebuilding statistics have been held up as proof that the country is building again. While we may be getting better at building more homes, unfortunately we are not very good at counting them. The DCLG’s quarterly housebuilding statistics significantly under-count new homes built. Indeed, the release suggests that they should only be used as a leading indicator.
The under-count reflects the failure to account for the greater diversity of market participants delivering new homes. It provides a reasonable estimate of market-sale homes built by volume housebuilders but has struggled to account for the increase in activity by SMEs, high-density developers, build-to-rent, and housing association development outside the Affordable Homes Programme.
The good news is that DCLG provides a more comprehensive measure in the housebuilding component of its net supply release. Unfortunately, this is only released once a year, with a substantial delay. However, the DCLG’s energy performance certificate data provides a better leading indicator.
The biggest frustration is that DCLG is aware of these issues yet we still see quarterly political point-scoring based on these flawed data. Given the complexities of the housing market, it is only once we move past this short-term politicking that we have any hope of solving the crisis.
To send feedback e-mail paul.wellman@egi.co.uk or tweet @paulwellman eg or @estatesgazette
This article was originally published on 24th August 2017
