Making sense of the HBF Policy Conference 2016Site Admin
The HBF Policy Conference 2016 saw many of the key players within the house building industry converge in Central London to discuss and debate the housing market in its current state, and more importantly, the short and longer term challenges facing developers.
Key questions included:
• Will the industry step up the outcry for more housing?
• What impact will the Starter Homes Scheme have on supply?
• How can developers effectively steward the supply chain and skills that are so vital in delivering quality homes?
These were just three of the questions facing delegates as Stewart Baseley opened the conference and he did not waste any time in tackling them head on. Stewart exercised his view that so long as the macro-economic conditions remain constant, that in the next 12 – 18 months, the industry would reach its target of building 200,000 homes per annum.
Whilst this is great news for the industry and UK PLC as a whole, the industry has to step up and ensure the homes that are delivered promptly and are of good quality; something that John Slaughter and John Adam picked up in their talks later that day.
Although the speech and Q&A with Housing Minister Brandon Lewis (MP) was cut short so he could return to Westminster for a meeting of the COBRA committee, Mr Lewis was able to convey his support to the industry and underscored the Government’s commitment to championing home ownership over and above renting.
Help to Buy, Right to Buy and the Starter Homes Scheme are giving people of all ages the opportunity to get onto the property ladder and Mr Lewis made no apology for pushing back on the traditional view that Government should just take care of the renters. Most people in the UK still prefer to buy homes ‘86% of people say they would choose to buy their own property’ he confidently asserted. The government is in the process of publishing a starter homes consultation so watch this space – all developers have been invited to participate in the debate on Starter Homes. Perhaps when the official Starter homes regulations technical consultation closes on 18 May 2016 we can hope for some of this uncertainty to be clarified.
Mr Lewis stressed the need for thinking outside of the box in terms of how 1 million new homes will be built by 2021. Un-needed brownfield sites currently owned by Government departments like the NHS and MOD, as well as land owned by Network Rail will be sold to get developments started and infrastructure projects like Cross Rail will all help support these new developments. But Mr Lewis requested the industry do its bit to ensure schemes are delivered quickly using modern technology. He also called for the industry to continue using apprentices.
After Mr Lewis’s speech, David Montague, Chief Executive of L&Q spoke eloquently about the challenges facing Housing Associations. Whilst L&Q are realising their goals in supporting the housing needs of aspirational Londoners, Mr Montague called on the Government to ensure there was long term political census and investment into the Housing Association sector; ensuring affordable land and strategic partnerships. He also made the point that unlocking public land is at a tipping point and pointed to the recent Barking Riverside project as a model of schemes where partnerships with house builders made all the difference.
After Mr Montague’s speech, John Stewart guided us through some very encouraging data that show the recovery in the housing market is well underway, but also stressed that the prosperity of the longer-term picture isn’t a given. ‘Brexit’, interest rate rises and changes to the global economy could all hamper progress, and Mr Stewart was right in pointing out that previous failings and myths still haunt the industry – namely that developers hoard land, thus adversely impacting housing supply. His housing stats overview pointed out just how reliant this market is on public sector, with over 50% of completions being public sector reliant with HTB and HA
The afternoon sessions saw Mark Aedy pose the question ‘Will the good times last?’ What has been an eight year good run was demonstrated by UK house builders’ stats being up almost 600% over the period. Earnings momentums suggest that the House Builders’ boom is one of the strongest sectors, with earnings up over tenfold since 2009.
Although they rose from a famously and near-tragically low base, financial results across some of the named builders were still very impressive:
• Taylor Wimpey results up 591% since 2008 – share price up by 58%
• Redrow share price up 28%
• Barratt up by 34%
• Bellway up by 50%
• Persimmon up by 53%
Interestingly, Mr Aedy’s (MD and Head of EMEA investment banking Moelis & Co) first slide jumped straight into the events that could turn our strong economy into a weak one. Uncertainty was the key word here. Headlines talking down the economy are becoming all-too regular and Mr Aedy warned of us talking ourselves into the next recession if we aren’t careful. The housing industry had made a staggering recovery since the year that cannot be named.
Developer share prices are out performing the FTSE average by a considerable margin and whilst there hasn’t been much activity in terms of acquisitions and mergers, recent successful floatations by Countryside and retirement developer McCarthy & Stone mean there is strong confidence amongst investors and The City as a whole. And this confidence comes off the back of an acknowledgement that low interest rates and Government support are increasing housing demand.
Lord Kerslake, Chair of Peabody Housing, argued that housing is a key issue in the London mayoral election, with 50k new homes in London needed per year but only 194k delivered in the last decade. The real challenge, we were told, is how to deliver all types of housing in the next 5-10 years. The London housing commission is in nothing less than a crisis, with average prices of homes in London being twelve times higher than the average annual salary in London, putting 80% of Londoners out of reach of home ownership.
Even in the rental market there are social and economic issues to consider-with wages rising 5% while rents went up 16% over the same period. Consequently there is great pressure on the South East to deliver expansion outside of London and sites within the green belt area are being considered.