According to data from the Land Registry, UK house-prices rose by 7.2 per cent in the year to September, with Rightmove predicting a price increase of 30.2 per cent by 2019.
While increased demand for housing has undoubtedly come as a positive development following the recession, without an adequate supply of new homes, this trend risks pricing many out of the market. In fact, the National Housing and Planning Advice Unit suggests 290,500 additional homes may be needed each year until 2031, though the Office for National Statistics reports that 2013 saw just 109,370 housing completions.
In order to learn more about the challenges preventing house-builders from boosting supply, Aldermore has invited three small construction firms from the Federation of Master Builders’ Home Builders Group to share their thoughts on the subject.
Nick Hammond, Director of Brick Baron
“From our point of view it’s predominantly the skills shortage that’s affecting us,” begins Nick Hammond, Director of North Humberside brickwork contractors, Brick Baron.
Hammond’s comments echo recent research from the National House Building Council, which found that 74 per cent of smaller builders believe there will not be a sufficient quantity of skilled subcontractors and tradespeople as the market grows in the next two to three years.
“The government have done what they need to in order to get the ball rolling again in terms of the number of houses that are supposed to be being built over the next few years,” he relates, “But what they’ve failed to do is address the skills shortage first.”
Rather than just a symptom of supply lagging behind demand in the jobs market though, he believes the problem is a more fundamental one, with fewer young people considering construction careers.
“It’s got to start at school and it’s just not being addressed at school level,” Hammond comments. “The number of school leavers wanting to go into the brick laying trade is dramatically decreasing on a year-by-year basis. What I think the government need to do is to address this seriously and invest in more training programs.”
Beyond early education, he also worries that apprenticeship reform in the near future will make it more difficult for small firms in the sector to train new staff.
“The other thing that’s affecting us is the apprenticeship situation, especially after the Richard review,” he states, concluding, “The implementation of apprenticeships is changing pretty shortly which is going to have a negative effect on the industry as a whole, especially the house-building industry.”
Nic London, Project, Contracts and Construction Manager at N London Construction
In contrast with Brick Baron, Nic London has not seen evidence of skills issues.
“From my point of view as an SME, I don’t find that there are skills shortages,” he admits, adding, “I don’t find that there are any materials shortages. The only problem that we have from a design and build point of view is local authority planning offices.”
This last point reflects findings from the National House Building Council, which reports that one third of small building firms feel the planning application process poses a major challenge for their business. London suggests, though, that it is not the regulations which represent a barrier, but the length of time it takes to approve applications.
“There are basically not enough staff to deal with the level of enquiry,” he states. “In the recession, local authorities lost staff due to the level of demand going down, but over the last twelve to eighteen months there has been a significant increase in planning applications and they can’t keep pace.”
For London, this hold-up doesn’t just delay the house-building process, but also acts as a deterrent for investors, who are likely to have to wait much longer to see a return on the developments they fund.
“The main point from my perspective is to tackle the issue of planning, then tackle the issue of finance,” London concludes. “We can address the issue of finance, but there’s no point saying we’ll lend money if you can’t push the money through.”
Adrian Swan, Managing Director of Swan Homes
For Adrian Swan, Managing Director of East-Midlands based Swan Homes, challenges for the industry are four-fold, with skills shortages, supply chain issues, finance and planning permission all troubling house-builders.
“There are a number of issues that are causing the whole of the industry, but more so SMEs, problems in bringing housing development forward,” he relates. “Which bit do you tackle first? There’s the immediate issue of the supply chain: that’s probably priority number one.”
Part of the problem, according to Swan, is that due to enduring caution following the financial crash in 2007, materials manufacturers are not increasing production at the same rate as demand is rising.
“Brick and block manufacturers don’t want to be in the position they were in five years ago when they had fields and fields of stock sat on their floor, and they closed a lot of plants,” he states. “While there are good signs of recovery throughout the UK, they’re still very cautious to invest tens, if not hundreds, of thousands of pounds back into new plants. Prices can really be ramped up because it’s difficult to get hold of the materials.”
Swan has noticed a similar effect on the availability of skilled labourers, mentioning:
“Skills shortages again are a problem, because everybody’s getting busier and the labour market is getting tougher. When disaster struck in 2007 and the market went into complete meltdown, cost-cutting initiatives and the drive to reduce expenditure for most organisations was catastrophic. Hundreds of thousands of people have left the industry and that’s very difficult to plug.”
“Next would be planning and finance, which are intrinsically linked,” he continues. “There are stacks of land opportunities out there at the moment but they can’t be taken without having the confidence you can access bank funding but also get consent. It’s the time that it’s taking to do that: on average even a small scheme is taking over a year to get planning.”
“It’s not a quick fix,” he concludes. “That’s the issue, there are no quick fixes here, but supply chain is definitely top of the tree for me at the moment.”
Aldermore welcomes other house-builders on Twitter to join the debate by sharing their thoughts on the most pressing issues for the sector
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