The industry’s
prospects are inevitably clouded by uncertainties over Brexit and the economy
but some positive trends emerged towards the end of 2017 which bode well for
the outlook in 2018.
One key industry
forerunner, private housebuilding, ended the year with a flourish, encouraged
by the Budget extension of Buy to Let to 2021 and, for now, continuing strong
demand.
An upturn in private
residential building work helped create a modest rebound in overall output in
November, according to the latest purchasing managers index from IHS
Market/CIPS. It recorded new residential project orders in November at the
strongest since June.
Private
housebuilders’ prospects for 2018 inevitably hinge on whether purchaser demand
will hold up. On the upside, near-full employment and continuing low interest
rates – which economists expect to reach 0.8% by the end of 2018 - should
help to maintain purchaser interest. The development pipeline in the sector
also remains healthy.
The latest Glenigan
forecasts point to a 21 per cent rise in planning approvals in the first nine
months of 2017 with rises in most English regions. The promising outlook for
Build to Rent should also help to maintain industry volumes.
But the pace at
which housebuilders start work on new sites will continue to depend on the
health of the overall housing market. Here, the latest evidence points to a
cooling, if relatively stable, national market. Although new mortgage approvals
fell for the third month running in October, this was largely due to a shortage
of houses for sale, according to the Halifax, and which may in turn augure well
for sales of new build. The latest Halifax index showed house prices up 2.4% in
the September- November quarter on the previous three months and 3.9% up on a
year ago.
But the picture
varies between regions and for housebuilders, areas further from London may
continue to show more promise in 2018. Stronger private housing markets are
among the key drivers behind Glenigan’s latest forecasts for an upturn in the
value of underlying construction starts in key regions in 2018 including the
East Midlands (where starts are forecast to rise by 31%), the North East (+7%),
North West (+18%), South West (+13%), West Midlands (+12%) and Yorks &
Humber (+17%).
Recent industry news
also reflects a healthier housing market in the regions. Bellway’s latest full
year results showed that the firm’s private house sales in the north increased
by 7% to 3,897 whilst its sales in the south dipped slightly. The firm’s Yorkshire
division increased output by 75% to 467 homes.
One trend which is
also likely to help keep the industry busy in 2018 is the growing number of new
dwellings created by converting larger houses into smaller units and flats and
as well as shops and offices into homes.
According to the
Nationwide, these change-of-use units have more than doubled in the past decade
to 37,000 in 2016/17, of which around 18,000 were granted under permitted
development rights. If these are included using the broader measure, it says
the number of dwellings now being created each year is only 3% below 2007
levels.
