The new decade and a general election victory for the Tories, has brought an end to the uncertainty of political stalemate which has had a major impact on growth in our wider economy since before the 2016 referendum.
But just how much influence does this have on the New Build sector?
Well, a significant amount actually. The sector has been slowly contracting since the country voted to leave the EU in June 2016. Compared with industry statistics from 2015 from the MHCLG (Ministry of Housing Communities and Local Government’s) on new dwellings, the 2019 figures suggest a determination to improve but highlights a slowdown in the industry. Statistically, since 2012-13, new build completions have increased by 65% from 118,540 to 195,290 in 2017/18. An additional 25,000 were additional dwelling conversions from retail outlets, as digitisation is leading to a decline in the need for retail space and significant changes in the High Street.
The 2019 figures show determination but also highlight a slowdown in growth compared with the last time the country experienced over 2% growth. From this, it’s fair to say that developer progress was clearly stymied by economic forces. Residential transactions also dropped by a further 2%, their lowest since 2013, to just under 84,490, a 16.5% decline compared to June 2018. Jumping forward to June 2019 and the fall dropped further by almost 10% to just over 25% on the previous year.
The impending fear of Brexit had a considerable impact on import ability and the price of housebuilding materials. Skilled labour forces started to reduce as foreign specialists previously working in the UK started to leave for less uncertain economic climates elsewhere. Investor enquiries dropped and with them so did demand.
But there is hope and a recognised need to change. The Government’s ongoing recognition of the need for reform to the industry is now in its second year of a pledge to deliver 300,000 homes per year by the mid 2020’s. These reforms are also designed to make major improvements to the planning process and attract much needed investment. These developments are analysed further in the latest tmgroup White Paper, Building Together: The collaborative New Dawn of New Build.
The paper contains robust data from all areas of the sector to consider what could be done to influence the speed of change across the landscape of residential and commercial new build property sectors throughout the next decade and makes for interesting reading.
It also provides evidence from industry insiders that the Government have addressed the need for the homes without the full understanding of the issues hindering new build developments in the UK.
A planned 2% growth in GDP(gross) would be a growth driver in construction output, but the effects of the last 3 years have seen reduced consumer and business confidence year on year fuelled by change and uncertainty. The recent election stimulates the prediction of an end to the Brexit quagmire with growth of 1.4% predicted this year and a slow but steady rise from the lowest point of 1.3% in 2019.
Issues such as under-funding, inconsistency in Local Authority approaches, migration of planning officers from the public to the private sector, a lack of legislative protection, technological disadvantages and time wasting, among others, have all contributed to a fundamental lack of impact in the early stages of change. There is much more radical reform and collaboration from all stakeholders needed to have a major impact in the next phase of progression. This is also needed to encourage the turnaround of waning investor demand with fewer feeling confident enough to enter the market.
The Building Better, Building Beautiful Commission was set up to tackle the challenge of poor quality design and build, and in July 2019 began to define proposals around the sustainability and aesthetics of future builds to meet the needs of a growing population. However, a number of central and peripheral factors are affecting the potential for this to happen and require consistent and continued effort to have a more definitive impact.
The New Build environment remains fraught with issues and stakeholders are more guarded than ever to protect their own interests. This is affecting efficiencies, cost and above all, the customer experience. Concerns regarding communication between key parties in the new build process are leading to strained relationships in the sector and a culture built around blame for each other.
Over a third of customers have reported poor treatment and communication and a lack of accountability from developers who pile on the pressure to pay a deposit only to be left unsatisfied with the quality and integrity of the sales information.
Quality variances have affected the market with the NNHC Satisfaction survey reporting 99% of customers with snagging issues on new properties. Legislation is being called for to regulate snagging surveys and their completion, after a suggestion of reduced motivation to fix issues comes into play once a deal is complete. Almost half of those (42%) reported at least six serious snags with 26% experiencing over 16 or more issues. All leading to a lack of understanding and empathy and perceived imbalance of power away from the consumer.
A drive to recognise the importance of ensuring greater developer accountability and consumer power is needed to improve the public perception of the sector. The industry needs consumers and builders on the same page regarding quality standards and the lack of legislative protection serves to manifest dissatisfaction and disillusionment.
The report finds that the consumer journey needs considerable improvement. Coupled with a review of the sales process to move to become more like the Scottish or Continental systems to prevent the growing number of fall-throughs.
Smaller and mid-range developers need the opportunity to build, to bring more choice into the market. They also need to surround themselves with competent teams covering all aspects of the build from start to finish to equip them with competitive advantage.
The research shows that customers are changing in their expectations and also their acceptance levels. A unified data source shows that £270m was lost in 2019 due to housing fall-through’s, adding up to a third of all UK housing transactions.
New targets suggesting completing local authority searches within 10 working days are a world away from the current picture. The average search can take up to 9 weeks with the slowest reported at 95 days. Alternatively, some are returned within 2 days, proving the need for a more holistic and standardised system.
Planning reform is urgently needed with a demand for more commercially minded and unbiased assessment of planning applications and more planning officers coming in from outside local government.
Further technological improvements in searches and at the legal stage can speed up the progress on site and retail sales. Better in-house technology could help Local Authorities to speed up planning applications.
Estate agency regulation and qualified entry from a recognised body such as RICS could support the vast number of credible and conscientious contributors to the market and separate them from the cowboys. This will build on the NAEA Propertymark required to raise industry standards and increase the skill set.
Sharing best practice among all parties in the industry will be the greatest help to create progress for all. This is seen as the biggest barrier by industry professionals and consumers and particularly at the small and mid-range end of the market who are less equipped to work as effectively or employ in house specialists like their larger competitors.
Collaboration, communication, consistency, and innovation is essential if all stakeholders are to achieve a streamlined and cohesive sector with harmonious progress. We are moving forward but there is still a long way to go.
For more information and to read the report in full click here.