Have you missed the Barratt helicopter?

Housing estate under construction - homepage banner

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.

Housebuilders propping up market sentiment

As the UK’s departure from the EU gets ever closer the pressure on house builders sales rates increases. Anecdotally, senior figures have told me that whilst footfall is still good, sales rates are at the bottom end of what is expected at this time of year and sales directors are using all the tools available to them to keep closing deals.

Keen to avoid snowballing a drop in market confidence, all the housebuilders reporting half or full year figures since Christmas are putting out a particularly positive narrative.

Gleeson Homes’ statement illustrates this perfectly: “Our target market remains strong and our customers have maintained their confidence. We do not see any signs of customer caution.”

John Tutte, CEO of Redrow was more specific: “The market fell away at the end of November into December about the time of the (Brexit) meaningful vote so we didn’t generate the leads in December which impacted January. But there has been improvement into early February – overall we are about 6% down and if you’d offered me that in December I would have taken it.”

The good news is that if buyers are delaying a buying decision there may be some pent up demand coming to market later in 2019 – if we come out of Brexit economically unscathed!

UK City property affordability index

Lloyds’ bank has recently compiled an interesting survey to compare housing affordability of UK cities. Using the simple metric of average house price versus average earnings they created an affordability ratio.

As a starting point, it’s interesting to note that in the five years between 2013 and 2018 average house prices in UK cities grew from £180k to £248k, a rise of 37%. In contrast, city wages grew just 11% to a little over £34k over the same period.

So where is the greatest disparity between wages and house prices and where is home ownership more affordable as a function of earnings?

Seven cities average house prices are more than ten times average salaries. Greater London, Winchester, Chichester, Truro, Oxford and Cambridge and Bath.

And if you want your salary to go the furthest in the property market? Then Stirling is the place to live. If you prefer to live in England then Bradford has a house price to salary ratio of just 4.6 and for Wales, Swansea comes in at 5.5.