A Tale of two Headlines about Developers and Housebuilding

  1. Britain’s biggest housebuilders make £7bn of profit in pandemic
  2. Shortages and planning delays hinder UK housebuilding – survey

Britain’s biggest housebuilders make £7bn of profit in pandemic

Britain’s biggest housebuilders rake in more than £7bn of profits in two years as coronavirus pandemic boosts property demand

  • Buyers stormed into the market in search of more spacious homes 
  • This so-called ‘race for space’ boosted profits at a string of developers 
  • Nationwide said house prices rose by more than 10 per cent in 2021 

Calum Muirhead www.thisismoney.co.uk 

Britain’s biggest housebuilders have raked in more than £7billion of profits in two years as the pandemic boosted property demand. 

Buyers, encouraged by a stamp duty holiday and record low interest rates, stormed into the market in search of more spacious homes. 

This so-called ‘race for space’ boosted profits at a string of developers from Barratt Developments and Taylor Wimpey to Redrow and Bellway. 

Analysis by the Mail shows eight housebuilders in the FTSE 100 and 250 are on course to have made more than £7billion in profits across 2020 and 2021 – according to reported pre-tax profit figures and forecasts by analysts. 

The property market froze when the pandemic struck in early 2020 but roared back as restrictions eased and a stamp duty holiday was granted. Last week Nationwide said house prices rose by more than 10 per cent in 2021 – the biggest annual increase since 2006. 

The price of an average property now stands at a record £254,822 – up 16 per cent since the start of the pandemic. 

Persimmon, the biggest housebuilder listed on the London Stock Exchange, is expected to amass a profit of more than £1.76billion over the two-year period. 

Barratt Developments is forecast to achieve nearly £1.3billion, while London-focused developer Berkeley is predicted to make just over £1billion and Taylor Wimpey £994m. 

Bumper profits are also expected among the mid-cap builders, with Newcastle-based Bellway in line for nearly £865m, Welsh company Redrow £577m and Vistry Group, formerly Bovis Homes, £432m over the two-year period. 

The weakest of the bunch is Surrey-based Crest Nicholson, which is only expected to report £116.1m in profits. 

However, Covid has not helped share prices in the sector, with most builders struggling to recover pre-pandemic levels. 

There are signs that the boom time could be coming to an end. Property transactions fell 52 per cent month-on-month in October, shortly after the end of the stamp duty holiday. 

While the figure rebounded by 24.3 per cent in November, it was still 16.4 per cent lower than at the same time in 2020. 

The cooling could also be accelerated by last month’s interest rate rise, which will push up the costs of mortgages.

Shortages and planning delays hinder UK housebuilding – survey

Worsening shortages of materials and labour combined with planning delays will hamper efforts to increase housebuilding in Britain in the next 12 months, according to an industry report.

Julia Kollewe www.theguardian.com 

Planning remains a major barrier to increasing the supply of new homes over the next year, according to a survey conducted by the industry body the Home Builders Federation, the construction finance provider Close Brothers Property Finance and the builders merchant Travis Perkins.

Delays in securing planning permission were cited as a problem by 94% of small to medium-sized developers.

Boris Johnson’s government has pledged to increase housebuilding to 300,000 new homes a year by the mid-2020s to tackle Britain’s chronic housing shortage. The 243,000 homes built last year was the highest number in 30 years, but the report casts doubt on the target being met.

Seventy-eight per cent of housebuilders said the supply and cost of materials such as bricks, timber and cement, posed a huge problem, compared with just 20% this time last year.

“In March we were paying £9 a sheet for 9mm oriented strand board [a type of engineered wood], and up until recently we were paying £32 a sheet. Every single product has gone up,” said one firm that took part in the survey. Another said that in order to secure materials in short supply they have to be bought in bulk in advance, using cash that could be used elsewhere in the business.

Worker shortages and rising wages were cited by 59% of builders as a major issue, compared with 19% last year.

The coronavirus pandemic has sparked a global supply chain crisis that has led to ships being stuck at ports and shortages of goods ranging from cars to bricks.

The UK construction industry has grappled with shortages of skilled workers for years as a result of ageing workforces, but the double shocks of Brexit and Covid have exacerbated these problems.

Many firms highlighted the lack of eastern European workers at the lower end of the trades. The labour shortages have resulted in considerable wage inflation, something that smaller firms are less able to absorb than larger builders.

An estimated 800,000 people are employed in the UK’s homebuilding industry either directly or indirectly in planning, design and construction of new properties.

The report did contain one bit of good news: an increase in the number of apprentices employed by housebuilders.

Almost 60% said they employed apprentices in their business, compared with just a third last year. Firms in the north were leading the way, with 88% hiring apprentices, compared to 59% in the Midlands and 52% in southern England.

Stewart Baseley, executive chairman of the Home Builders Federation said: “SMEs [small and medium enterprises] are literally having to put their businesses on hold whilst local authorities delay the start of construction as their planning departments don’t have adequate capacity to process applications effectively. Allied to concerns on materials and staff, planning delays threatens the demise of even more SME builders.”

Many of those surveyed felt that the planning process disadvantaged smaller firms in particular, partly because larger builders have the financial clout to absorb the costs of long and complex planning processes, and because councils make the planning process smoother for large housebuilders, as larger schemes enable local housing targets to be met more easily.

Frank Pennal, the chief executive of Close Brothers Property Finance, said: “The combined challenge of both labour and material shortages, rising costs and planning delays are a serious risk to the delivery of new homes across the UK.

“Developing homes takes months and years and while some of these issues might only be short term, they risk leaving a lasting legacy on the provision of new homes.”

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