As retail lurches from crisis to crisis – the latest casualty, Debenhams, falling into and then being bought out of administration in a move described by Sports Direct’s Mike Ashley as a “national scandal” – the residential sector this week demonstrated its extraordinary capacity to resolutely soldier on come what may or, more accurately, despite May.

Liz Hamson Leader

The residential sector has been well and truly side-lined by the prime minister in the face of all-consuming Brexit (which having chewed her up will no doubt soon spit her out), but it is doing pretty well this year all things considered, certainly compared with last year.

The share prices of the listed housebuilders rocketed 18% in value in the first quarter of 2019 – quite a reversal of fortunes after a miserable 2018 when they nosedived 27%. One of the key factors behind the recovery is the high dividend yields on offer, which at 6% are significantly above the FTSE All-Share average of 4.2%.

Another, arguably more important, reason is that as the politicians get sucked ever further into the Brexit vortex, everyone else keeps buying and selling their homes. Sure, the forecasts are not brilliant, the London market does not look too clever and overall transaction volumes are down, but people keep moving home and the outlook is not that bad – prices are expected to remain flat rather than fall, and sales volumes could well pick up next year.

In the meantime, two of the housebuilders that did not do so well – McCarthy & Stone and Telford Homes both saw their share prices fall – are boosting their commitment to BTR in a bid to get back into the black. McCarthy & Stone is now offering retirement homes for rent as it looks to replicate the model that has proven such a success for the student accommodation sector.

The move is not entirely surprising given that the man at the helm, John Tonkiss, spent 10 years at Unite and it has certainly impressed analysts at Jefferies, who think there is potential for a significant roll-out of McCarthy’s BTR offering. Whether it will be easy as Tonkiss makes it sound to emulate the success of student accommodation, which is by nature more rental-market oriented, remains to be seen.

But at least McCarthy & Stone is doing something different, and it is not the only one trying to innovate its way to a brighter future. Places for People is hoping to future-proof its business no less with its new Innovation Lab. The idea is to enlist the help of start-ups to explore how tech innovation in retail can be used in the residential sector and what scope there is for modern methods of construction, virtual reality and predictive analytics. If the definition of insanity is doing the same thing over and over again and expecting different results, this sounds like the definition of sanity to me.

Another innovative idea that could have legs is Global Student Accommodation’s micro-living student accommodation offer. The concept, which has already been trialled in Australia and Japan, involves adjacent rooms being set out in an ‘S-shape’ format that positions the bed in one room above the bed in the other, like a bunk-bed split across two rooms. It won’t be for everyone, but the more affordable price point will be. It is also a perfect illustration of how necessity has become the mother of invention in residential.

The message is clear: fail to innovate, prepare to fail.

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