House builders mood brightens after prices tick up

A rare piece of good news for house builders emerged in the latest Halifax index showing house prices rose fractionally in March (up by 0.8% compared to February) helped by an upturn in transactions and the first increase in mortgage approvals for six months.

Whilst the Halifax still expects an overall slowing in the housing market this year, the resilience reflected in the March figures provides some reassurance for private housing construction activity over 2023.

In particular, the large private volume house builders will find it easier to maintain sales – and hence construction activity – in the absence of the marked falls in house prices and poor market sentiment which were widespread after interest rates rose at the end of last year.

Improving customer demand

Indeed, the mood amongst the larger quoted volume house builders has brightened so far this year, helped partly by more sales of affordable units.

Bellway recently noted that it had seen customer demand improve since January. If its current reservation rates are sustained through the Spring, the company’s build programme is on track to deliver 11,000 homes in its current financial year (ending in July). This is only around 200 below the 11,198 which it built in the previous year.

Bellway has seen weaker private demand partly offset by a move to accelerate the construction of social homes. Although its rate of private reservations in the first half (ending in January) fell to 138 per week from 202 per week a year earlier, the firm’s level of construction completions in the period was virtually unchanged at 5,695 homes.

And whilst Bellway is spending less on new land, the company says it is well-placed to deliver a modest increase in the number of construction sites which it builds on by this summer.

After falling sharply at the end of last year, sales rates at fellow volume house builder Persimmon have also improved in the first eight weeks of this year. Whilst its legal completions are set to be down sharply this year, the company is still planning a significant construction programme involving some 8,000-9,000 new homes during 2023.

In another encouraging sign, Persimmon expects to build on an average of around 259 housebuilding sites across the country this year – a similar level to 2022 – and to drive outlet growth from 2024 onwards.

New developments

Glenigan data provides numerous examples of significant sites where volume house builders are planning to launch new developments in the months ahead and which offer new work opportunities for contractors and suppliers.

In Milton Keynes, Bellway Homes (Northern Home Counties) has reserved matters granted and is planning to start work in October on a £46.3 million development of 197 homes and 80 flats at Whitehouse Park Parcels in the city’s Western Expansion Area. Around 30% of the units will be affordable on the scheme, where work is set to run for 20 months (Project ID: 22123033).

A significant affordable element also features on a £30.6 million scheme at Tewkesbury in Gloucestershire (pictured) where Persimmon Homes (South Midlands) plans to start work in October. Around 35% of the 215 homes to be built will be affordable on the scheme, where work is set to run for 20 months (Project ID: 22159830).

Inner city private housing developments are also helping to sustain activity across the sector. In Wandsworth, Taylor Wimpey (South West Thames) is expecting to start construction in November on a £71.6 million scheme of 433 homes at the Riverside Business Centre Development at Haldane Place. Demolition work of existing buildings is set to get underway in May on the project, where work is due to run for two years (Project ID: 18306530).