Housebuilders will have one eye on the wider housing market

Construction firms across England and Wales are continuing the process of gradually reopening sites.

As we have noted previously, however, this will be a managed slow and steady return to activity.

The initial focus will be on completing units where existing customer orders exist and this, combined with supply chain disruption and lower productivity as they observe social distancing rules, is expected to impact both new homes delivery and sales this year. We have previously estimated that delivery will be 35% below expected output.

In updating its guidance for the housing market on Wednesday, the government also recognised that the construction industry will need to be able to adapt its normal working practices.

Housebuilders will be allowed to keep sites open for longer in order to stagger builders’ arrival times and ease pressure on public transport so they can meet social distancing protocols, for example. As part of this, firms will be able to apply to extend hours until 9pm Monday to Saturday in residential areas, and “beyond that” in non-residential areas.

Sales recovery key

Of course, this alone won't unlock the market. What happens to sales values and volumes in the coming months will have an impact on delivery. In this regard, news that sales offices and show homes, alongside estate agents, can re-open is a welcome, and logical, step forward. After all, the fact remains that housebuilders will only build what they can sell.

The announcement untangles one of the main sticking points for the market, with an inability to conduct viewings and difficulties getting mortgage valuers on site curtailing activity. It also goes some way towards satisfying questions around where demand will come from following construction restarting.

David O’Leary, Policy Director at the Home Builders Federation (HBF), the trade association for housebuilders, has been involved in the discussions with government officials, advisers and ministers.

“The big challenge now is how quickly housebuilders are able to gradually increase productivity, and that will likely be done with one eye on the wider housing market and how quickly demand returns there,” he said. “The initial signs are that sentiment has held up relatively well, with reservations still being taken despite sales and marketing suites being closed.”

“There are issues around parts of the supply chain – the availability of plasterboard, for example – but we have done a lot of work behind the scenes during lockdown to facilitate communication between the housebuilders, the builder’s merchants and the manufacturers to ensure any significant hold ups will be avoided.

“Recent events have really shone a light on how interwoven we as a sector are with different parts of the economy. Moving house has a clear multiplier effect for the economy with SMEs and other businesses feeling these benefits.”

Further measures

In addition to the effective re-opening of the market, local councils and developers will be allowed to publicise planning applications through social media instead of having to rely on posters and leaflets.

Local councils have also been given flexibility to support smaller developers by allowing them to defer Community Infrastructure Levy payments, one of the key recommendations we outlined in our five-point plan to reignite the housing market post-Covid.

The moves are welcome, but challenges remain, not least the impending deadline for Help to Buy in its current guise.

“The 31 December deadline for practical completions under the existing Help to Buy scheme now looms large for builders and buyers. With the production losses to date and the reduced capacity moving forward, some flexibility on that deadline would help maintain supply levels and give buyers additional confidence that their purchase won’t be put at risk,” David added.