Another Persimmon CEO Departs

After 15 months in the job, Dave Jenkinson has announced he will step down from his position of CEO of Persimmon. He took over from Jeff Fairburn after the bonus scandal which attracted a backlash of criticism from all quarters. Jenkinson intends to stay on while the firm searches for his successor.

The reason for his departure is far from clear. Jenkinson is only 51 so retirement is not the obvious answer. Although given he received over £40m in bonuses as part of the infamous LTIPs scheme in the past few years retirement would appear to be financially viable!

Jenkinson’s primary objective as CEO was to realign Persimmon’s culture as the firm’s reputation had become increasingly battered by build quality issues and a high number of customer complaints. 

In his statement, Jenkinson said: ‘I’m very pleased with the progress that we’ve made over the last year in reshaping Persimmon’s approach and culture while at the same time maintaining our operational momentum.’

However, an independent review from December, written by Stephanie Barwise, a QC at law firm Atkin Chambers, said there was a failure to meet minimum building standards which was a ‘manifestation of poor culture’. She urged Persimmon to reconsider its ‘purpose and ambition.’

Given the conflict of the two statements, it’s difficult to determine how well the culture reboot is going and if that was a contributory factor in Jenkinson’s decision to leave.

Progress on the New Homes Ombudsman

The Ministry for Homes, Communities and Local Government has announced more information regarding the proposed new homes ombudsman.

The government is eager to create a mechanism whereby disgruntled customers have an independent means of redress. 

The spirit of the ombudsman is clear and forceful from two government quotes: 

“The ombudsman will stop rogue developers getting away with shoddy building work and raise the game of housebuilders across the sector” 

“give people buying a new home the confidence they need that when they get the keys to their home, they are getting the quality they expect.”

But when it comes to detail it seems there is still some way to go. There is no date for the enshirement of the ombudsman in law just “as soon as possible”

Where customers are in dispute with the developer “the new ombudsman will act swiftly and independently to resolve any issues”. It sounds decisive but lacks specifics.

However, it was made clear that it will be compulsory that all house builders sign up to the ombudsman.

It will be interesting to see what adjustments housebuilders need to make to meet the ombudsman’s required standard. Will those adjustments limit speed of production or hit profit margins? And will it actually prove to be a great marketing tool for house builders to tempt second hand buyers into a new home?

Housing Minister Turns Recruiter!

The HBF has launched a report in parliament stating that the new homes industry needs 49,000 new recruits if the government target of 300,000 homes a year are to be built. 

In full sales mode, the document calls on the “brightest and best” to consider a career in house building. Clearly targeting the image of hard hat and muddy boots, it goes on to highlight the variety of positions in housing developers.

“Getting your hands dirty is optional – though construction is essential to home building, so too is finance, design, planning and sales” states the report.

It continues “For the eco warriors, how about becoming a Sustainability Coordinator?” and follows with “A tech whiz with an eye for design? Becoming a Building Visualiser could be for you”

Housing Minister, Christopher Pincher, threw his weight behind the recruitment drive: “this sector is one of the most diverse and well-paid industries in the UK. It caters for everyone from the best and brightest graduates designing and creating the homes of the future to school leavers starting their very first job.”

For once I am inclined to agree!

Customers say there’s still work to be done……

The independent New Homes Review has been released and shows only minor improvements in customer satisfaction in both pre-sale and post-completion. Even with the uplift, only 55% of customers are claiming to be happy with their builder’s service levels after they have moved into their new home.

89% of customers are experiencing snags with their new home and only two-thirds are satisfied with the finish and build quality.

The homeowners alliance focused on the finding that only 64% of new homes are completed on time. Chief Executive, Paula Higgins stated “Developers need to stop over-promising and be more realistic about their timelines, and communicate this to customers.”

The review also cites a small drop from 69% to 67% of customers believing that their new home represented value for money. 

For all the recent soundbites from housebuilders of focus on quality, it appears the customers still think there’s plenty of room for improvement.

Record New Homes Registrations in 2019

Last year saw the highest number of new homes registrations since 2007 with a total of 161,022. Private registrations were 3% down whilst social housing jumped by 13%. Whilst a very small component of the overall market, build to rent leapt by 57%.

New homes completions were marginally up during the year with Northern Ireland, Yorkshire and Eastern being the big regional gainers. Interestingly, London saw a 7 decrease in completions whilst having a 37% increase in registrations.

And for those with short memories a little reminder of how tough times were a decade ago: in 2009 just 88,849 new homes were registered, around 55% of last year’s number. Since then the industry has registered over 1.4 million new homes.

A new version of affordability

The government is currently in a consultation period regarding First Homes. This is an initiative to significantly improve the affordability of housing for local first-time buyers, forces veterans and key workers such as nurses and teachers.

The key principle is designated new homes will be sold at a minimum of a 30% discount to market value. The exact level of discount will be set by the local authority and once fixed will remain in perpetuity on that property. 

So the owner buys at a 30% discount but must sell at a 30% discount after an independent valuation to another buyer who meets the eligibility criteria (ie a local first-time buyer) when they want to move up the housing ladder.

The government is considering whether to use section 106 as the vehicle for delivery of First Homes or to set a separate percentage of units on a development as the house builders obligation. As with current affordable homes the CIL is likely to be waived.

Maybe you have had your say already but if not click here to contribute to the consultation and take a deep dive into the details.

Housing Transaction Numbers Sliding

Over the past three years, the number of housing transactions has dropped significantly. 

According to the Q3 2019 edition of the Conveyancing Market Tracker from Search Acumen, there have been over 100,000 fewer transactions in the first nine months of 2019 compared to the equivalent period in 2016.

Unsurprisingly, the political and economic uncertainty during that period is front and centre when looking for causation. 

Andy Sommerville, Director of Search Acumen, said: “Every passing quarter of 2019 has brought more political headwinds to the property market due to Brexit related uncertainty. One hundred thousand fewer transactions so far this year compared to 2016 is an indicator of the ‘Brexit effect’ on an already cooling property market.

The report also cites a shift towards the largest conveyancers with a number of smaller firms no longer operating. In fact, despite overall declining transaction levels, conveyancing volumes are up by nearly 8% quarterly from 228,994 in Q2 to 246,816 in Q3, with a leap of more than 5,500 transactions – more than 10% – for the top ten biggest conveyancers.

Who do you believe? Election 2019

The conservatives are pledging to deliver 1 million homes in 5 years. A quick online search of ONS figures reveals the last time the UK built 200,000 homes in a year was back in the late eighties. And we have built around 880,000 homes in the past five years. 

So how do the conservatives propose the uplift in numbers?: through an overhaul of the planning system to encourage the private sector to increase production.

For Labour, the focus is on affordability. They are promising to build 100,000 council homes a year, which will be directly controlled by local authorities. In addition, they have also pledged 50,000 affordable home to buy through Housing Associations with affordability determined by local incomes. This will be financed by using half of its Social Transformation Fund

Finally, the Liberal Democrats are planning to build 300,000 homes per year with one-third of those being ‘social homes’