Housing Under The Media Spotlight
As the general election draws closer, one of the biggest issues under the media spotlight is housing, writes Tony Abel.
According to a series of headlines: our housing market is ‘broken’; MPs are calling for an end to the ‘dominance’ of the large, national house builders, saying that smaller firms don’t have the ‘scale’ to tackle larger sites; those same smaller builders are ‘in decline’; and finally, this week came news that the Bank of Mum and Dad is now the tenth largest mortgage lender, just ahead of the Yorkshire Building Society.
There is inevitably a mixture of truth and political spin in these headlines. So let’s try and unpick it all and discover the facts.
First of all, this issue of scale, and the suggestion that smaller builders don’t have the critical mass to take on larger sites. There is some truth in this, but it is not just scale that is the problem. Far more relevant is that the finance sector is still hesitant to lend to house builders, as they perceive the sector – and smaller operators in particular – to be high risk.
Clive Betts, chair of the Communities and Local Government Committee, claims that the housing market is ‘broken’ and that smaller builders are ‘in decline’. In fact, the market is not broken - far from it; it is the strongest that it has been for about eight years. The only part of it which is not working is the lack of supply – we need to find a way to build more new homes to meet demand.
And you can’t generalise about smaller firms in the sector. I guess you would call Abel Homes ‘small to medium’ (we build in excess of 100 new home each year) - and we are growing by around 20 per cent a year. So not declining at all.
However, as I have said before, it takes time for such a massive industry to get fully back up to speed after taking such a big hit in the torrid recessionary years from 2008. There are still skills shortages, not just of bricklayers and carpenters, but in the whole supply chain: materials suppliers, property lawyers, architects, planners, engineers, ecologists. Add in materials shortages (it is difficult to obtain roofing tiles at the moment, for example), and you can see that it’s not easy.
But in the end, it all comes back to finance. Building homes is a high risk activity which requires big up-front funding, and difficulty in obtaining that is the main reason new homes are not being built at the rate the government would like to see. And when more than a quarter of all house buyers need financial help from their families, there is clearly still an issue with mortgage finance too.
We must have a stable economy where everyone – bankers, builders and house buyers – have the confidence to invest or the current situation will endure. Will the general election deliver that confidence? I do hope so.