Solving housing shortage, supply crunch eases & government seeks £4bn from developers over cladding
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
We need to build more homes
How do you incentivise enough housebuilding to meet the UK's growing population? Is it even possible to build enough homes to improve affordability?
These questions have been the subject of scores of government reviews and committee publications over the years and this morning we have another one from the House of Lords Built Environment Committee. There is a lot to unpack, which reflects the complexity of the issue. Recommendations span boosting housing for the elderly, special support for SMEs, release of more suitable land (including greenfield) and sorting out skills shortages - particularly of the green variety.
At the core of the report lies a request to fix the planning system, in part because local plans are too complicated and planning departments are severely under-equipped. "Uncertainty about the future planning system and delays to planning reforms have had a ‘chilling effect’ on housebuilding," and "it is impossible to have a ‘plan-led’ system of development in the absence of local plans and without sufficient planners," the committee states.
Other points worth noting include welcoming the growth of the build to rent sector and a withering assessment of Help to Buy, which the committee says will have cost around £29 billion in cash terms by 2023 and "inflates prices by more than its subsidy value in areas where it is needed the most." - the FT leads on that.
The supply crunch eases
Supplier delays that have dogged the construction industry for much of the pandemic are easing and the rate of price inflation for materials is slowing.
The number of construction firms reporting supplier delays dropped from 47% in November to 34% in December, according to the latest IHS Markit / CIPS UK Construction PMI. Some 5% of firms reported shorter lead times. Higher fuel, energy and raw material prices continue to push up average cost burdens but the rate of inflation fell to a nine month low.
Still, tighter pandemic restrictions and rising Covid-19 cases have put the brakes on growth, especially in the commercial sector. The rate of growth across the UK construction sector slipped back to its lowest level since September. Just over half of the survey panel forecast a rise in business activity during 2022, while only 9% predict a decline.
Cladding
The government will seek to secure up to £4 billion from developers towards the cost of fixing dangerous cladding, on top of £5 billion in existing grants for tall blocks, according to yesterday's Sunday Times.
There is little detail beyond that - the rest is to be set out in a speech by Michael Gove today. The industry has responded to the news via this morning's FT:
“Whilst housebuilders are committed to playing their part, there are many other organisations involved in the construction of affected buildings, including housing associations and local authorities,” the HBF tells the paper. “As well as developers and government, other parties should be involved in remediation costs, not least material manufacturers who designed, tested and sold materials that developers purchased in good faith that were later proved to not be fit for purpose,” it added.
The property market in 2022
Tom Bill looks into his crystal ball and lays out what to expect in the residential market during 2022.
Most notably, supply shortages that underpinned last year's double-digit house price growth looks set to ease. Sellers were becoming more active before Christmas, and the number of UK sales instructions in November and December rose by 7% versus the average between 2015 and 2019, Knight Frank data shows. Market valuation appraisals, a leading indicator of supply, was 10% higher.
Still, demand remains exceptionally high so the imbalance is going to take time to unwind. The number of new prospective buyers in the UK in the final two months of 2021 was 63% higher than the average between 2015 and 2019. For more on interest rates and overseas buyers, see the full piece.
In other news...
Stephen Springham unpacks retail's Christmas trading figures:
"Definitely far stronger than 2020, all the more so since fears of lockdowns and further restrictions over the festive period thankfully did not materialise. Of course, renewed Covid-19 fears in the face of the escalation of the Omicron variant and high levels of self-isolation may have dented performance in the week preceding Christmas Day itself, but not enough to de-stabilise Christmas trading completely by any means."
In a new Rural Market Update, Andrew Shirley covers details of the government's Local Nature Recovery and the Landscape Recovery schemes.
Faisal Durrani on why residential prices in the world's tallest building, the Burj Khalifa, climbed 23% last year.
Elsewhere - One million to be 'stealth' driven into higher UK tax rate amid financial squeeze (International Investment), planning U-turn lets residents keep right to reject new builds (Times), bullish finance directors are ready to spend again (Times), Starwood development loan secures Elephant and Castle project for Get Living (Times), U.S. hiring slowed in December as employers struggled to find workers (NYT), Let more Indian workers into Britain says CBI (Telegraph), Developers pressure Sadiq Khan to renegotiate Olympic Park housing deal (Telegraph), No jab no job at Citigroup (Bloomberg), Goldman expects four Fed hikes this year (Bloomberg), the slow puncture of the UK vs the EU (FT), UK’s post-Brexit farm payment overhaul fuelled by ‘blind optimism’ (FT), and finally, why southern homebuyers are looking north (FT).