It’s been a funny old month in the housing industry.
Just when it seemed that the volume housebuilders were firmly bedded in clover, there was a change in tone in their latest missives to shareholders. And, just when the long-heralded arrival of the build-to-rent sector seemed to have faded from the radar screen, it suddenly looked like all systems go.
There is little regulatory requirement to publish much in the way of numbers in quoted companies’ trading updates and the choice of adjectives employed is often as good a gauge to housebuilders’ fortunes as the numbers they choose to divulge. On that basis, Bellway’s 8 August pre-close trading statement almost sent my “adjectivometer” off the positive end of the scale: “Favourable trading environment… well positioned to continue its growth strategy… customer demand has remained strong… improving economic outlook… etc.” Given that the Newcastle-based group has a reputation of seeing all glasses as, at best, half empty rather than half full, the market seemed set fair.
However, the needle started slipping back to the left after Persimmon kicked off another round of sector updates on 4 November: “We remain encouraged by the level of customer confidence in the UK housing market”. “Encouraged” is positive (just), but hardly guaranteed to set the pulses raising.
Bovis’s on 7 November appeared to continue the drift: “Sales rates have been robust, albeit lower in the second half of the year compared with the strong equivalent period in 2013.”
For both, the numbers proffered supported the view that frothy conditions were coming off the boil. Persimmon said its sales rate per site per week was down by 2% in the 18 weeks since its half-year end, compared with a year earlier. But in the group’s accompanying conference call, management conceded that this reading comprised an 8% year-on-year improvement for the first seven weeks, while the following 11 were down by 6% on the same basis.
Bovis quoted a rate of 0.58 units per site a week, down from 0.6 in 2013, but for its whole fiscal year to date. Looking at the H1 figures and, again, with a bit of disaggregating on the back of an envelope, it looks like the sales rate is down almost a quarter since the half year.
Help to Buy scheme
In both cases, the blame was apportioned to a flurry of activity last year as Help to Buy was launched. Redrow said: “The high demand generated by the launch of the Government’s Help to Buy scheme in 2013 has reverted to a more normal level of activity.”
This contributed to a sales rate of 0.65 outside London, compared with the “abnormally high” 0.87. But in the equivalent statement in 2013, there was no mention of “abnormality” in Redrow’s commentary, and Help to Buy continues to be available to all qualifying buyers.
In summary, there is a hint from all three - which have only modest exposure to the clearly slowing London market - that a demand slowdown has set in over the autumn.
Berkeley’s interim results will be out on 5 December. Founder Tony Pidgley and MD Rob Perrins have built a reputation for 20:20 foresight; most observers will be focusing intently on what they have to say.
By contrast, the build-to-rent sector seems to have emerged from hibernation. At a Savills seminar to push its latest house-price forecast a strong case was made for the imminent rise of B2R. Delancey then described how its first two schemes - one on the Olympics site and another at Elephant & Castle - were going well.
Another prime mover, Grainger, is putting the final touches to its London Road Barking development of 100 PRS units and is planning to roll out the model beyond the capital. On 10 November it also announced a partnership to push forward new-build rental opportunities with Sigma Capital, which also announced its own £100m initiative.
A small but symbolic sign of the growing interest in the sector is that a chunky book produced by Grainger on financial, design and other aspects of build-to-rent has completely sold out and another print run has been ordered.
Alastair Stewart is building and property analyst at Progressive Equity Research.
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