Are we having a pre Brexit wobble?

The latest NHBC registration figures would suggest so.

Steve Wood, The NHBC CEO, said “The slowdown in overall registrations in August seems to be partly due to prevailing uncertainties in this pre-Brexit period. Nonetheless, it is encouraging to see growth coming through in the affordable and rental sector.”

The number of new homes to be built for those in the affordable and rental sector in the UK continues to rise significantly but these gains have failed to offset the decline in the private sector registrations.

3,875 new homes were registered in the affordable and rental sector in August, a 17% increase year-on-year (3,252 in 2018), whilst home registrations in the private sector fell 20% to 8,420 (10,460 in 2018).

With the Brexit deadline looming and the prospect of a general election before the end of the year housebuilders will have to work hard to keep their sales rates up in the face of a potential “wait and see” mindset from customers.

Bovis and Galliford Try Merger

It’s not the first time this has been attempted but an increased offer from Bovis for the Linden Homes/GT Partnerships part of the Galliford Try group seems to have got all parties excited. 

There are certainly synergies. 

Firstly, Bovis doesn’t currently have a regional office north of Stafford. The merger would give them an instant presence in the North West, Yorkshire and the North East, all key regional house building markets.

It would also take Bovis’ fledgling partnerships business straight into the premier league on the back of GT Partnerships regeneration market share.

And finally, the divestment of their housing arm would leave Galliford Try as a well-financed stand-alone contractor able to focus on its core business.

The two businesses have agreed terms and are seeking shareholder approval, likely to take around three months. Should the deal proceed the newly formed company would become the fourth largest housebuilder in the UK.

Have you missed the Barratt helicopter?

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House builders have largely shunned TV advertising since the iconic Barratt helicopter advert of the 1970s. (Yes it really was 40 years ago and if you fancy a minute of nostalgia click here)

However, that’s about to change with Redrow embarking on a TV campaign to challenge the widely held perception that new builds are small, uniform and soulless.

I’ll let Redrow take you through the myth debunking as they aim to differentiate their product both from other house builders and the second-hand market.

If the campaign proves to be successful it may well bring buyers to the wider new build market who may have only have been focused on second-hand homes. Likewise, it may also pave the way for other builders to take the plunge on TV advertising. It’s fair to say that the medium has changed significantly since the Barratt helicopter.

Have you had a call about a CEO position?

If so, it may have been the top seat within Gleeson’s boardroom.

After 7 years as MJ Gleeson’s CEO, Jolyon Harrison, has stepped down with immediate effect after a disagreement over remuneration.

Gleeson made the following statement: “Following extensive discussions with Mr Harrison regarding his remuneration and succession planning, the board concluded that it was not possible to find a mutually acceptable basis for Mr Harrison to continue as chief executive officer,”

James Thomson, former CEO of regeneration rival, Keepmoat, has been put in post as interim CEO whilst the business begins it’s search for a permanent successor.

The business sought to reassure investors by restating that forthcoming results will still indicate strong growth and be in line with expectations.

How fast did house prices grow in the past 12 months?

The quick answer is: depends on who you ask?

Halifax released figures claiming a 5.2% average price increase for the 12 months to May of this year. This looks somewhat generous given that Nationwide put the figure at just 0.6%. The ONS put the figure at a slightly more optimistic 1.4%.

When questioned about the discrepancy the MD of Halifax, Russell Galley, claimed that their figure was flattered by weak growth in the previous period. And then resorted to covering all eventualities with the following statement: “Looking ahead, we expect the current trend of stability based on high employment and low-interest rates to persist over the coming months, though clearly any downturn in the wider economy would be keenly felt in the housing market”.

Private Registrations down

It appears that Brexit is taking it’s toll on the new homes market as evidenced by the drop in private registrations according to the NHBC.

The national figure for year on year February was a decline of 17%. Overall registrations, including affordable, decreased by 7% showing a clear upsurge in the affordable sector.

However, even including the affordables Yorkshire and the North East both showed declines in total registrations of 4% and 24% respectively. The North West showed an increase of 11%. This was significantly supported by affordables as the private registrations for the region dropped by 5%.

The rolling quarter stats for December through to February summarise the picture well. Nationally, private registrations dropped by 13% whilst affordable shot up by 36%.

Let’s hope for a political resolution soon and better numbers in the second half of 2019.

Overall Customer Satisfaction Improving

Talking of the HBF customer satisfaction survey, chairman Stewart Baseley was keen to point out that the 2019 results are the best ever since the survey started back in 2006.

From around 60,000 surveys completed, 87% of customers would recommend their builder to a friend and 86% were satisfied with their new home. (I wouldn’t want to be friends with the 1% who weren’t satisfied but who would still recommend!). In both cases, these figures are an improvement of 1% on the previous year. Hardly a quantum leap but trending in the right direction.

On a positive note, 4 out of 5 largest UK housebuilders now have a maximum 5-star rating thanks to Taylor Wimpey and Redrow gaining their 5-star status in the most recent survey.

Slightly more concerning is that only 77% of customers were happy with their builders after sales service. There is still work to do on improving the customer journey and ensuring that people feel buying new was the right choice.

Persimmon’s home buyers retention initiative

Persimmon’s sales contracts are changing. The business is writing in a clause to allow the buyer’s solicitor to withhold up to 1.5% of the purchase price until faults found prior to key release are rectified. On Persimmon’s average selling price this would be around £3,600.

Roger Devlin, Persimmon’s chairman, said: “This is a first among the UK’s large housebuilders and I hope will lead the way in change across the sector.  This move, and the urgency with which we will introduce it is a clear and unambiguous signal of cultural and operational change at Persimmon.”

The recent HBF customer satisfaction survey gave Persimmon just 3 stars whilst the other biggest 3 UK builders all received 5 stars.  Coupled with the prospect of a new house building ombudsman it appears Persimmon have been spurred into action.

How effective the retention initiative is remains to be seen keeping in mind that it only covers faults identified before the customer moves in and is capped at 1.5% which will be around £2,000 on many starter homes. However, anything that is aimed at improving the reputation of new homes should be welcomed. Time will tell.