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Housebuilding Market Report 2011
Key Note Publications Ltd, March 2011, Pages: 139
The total output of the housebuilding sector in Great Britain was estimated to be £32.6bn (at constant (2005) prices) in 2010, representing an increase of 9.8% on 2009 figures. The industry has faced extremely challenging times over the past 2 years, driven primarily by the global economic and banking crisis. Consumer demand for housing remains high in the UK, although, affordability and mortgage availability remain key issues, as do falling house prices. Many housebuilders have reduced their workforce and written down the value of land banks in order to survive.
Housebuilding can be separated into two main segments — new build and repair, maintenance and improvement (RM&I), which can each be further sub-divided into private and public sectors. The private sector accounts for 68.3% of all housing output, thus reflecting the industry’s dependence on consumer spending power. RM&I accounted for an estimated 50% of total housing output in 2010 compared to new-build housing, garnered by the high levels of home ownership and therefore the investment by homeowners in their properties. The public sector, which includes council homes and ‘affordable’ housing, is mainly dependent on Government investment. At the time of writing, following the Comprehensive Spending Review, which was published in October 2010, by the Coalition Government, concerns have been voiced regarding the severe forthcoming cuts to the public-sector housing budget, which is likely to impact upon delivery of new-build housing programmes. The Decent Homes programme for public housing RM&I is also winding down.
The housebuilding market is dominated by a small number of large volume builders, with Barratt Developments, Taylor Wimpey and Persimmon accountable for a sizeable proportion of private-sector new-build output. Whilst there has been some consolidation among medium- and large-scale builders, there are also a high number of smaller builders which operate locally and undertake repair and refurbishment work. Many of these have also found market conditions tough over the past 2 years.
Looking ahead, despite problems of supply, demand for housing remains strong in the UK. The rising population and an estimated increase in the number of households in Great Britain from 26.5 million in 2011 to 32.1 million in 2031 means that the housebuilding industry is struggling to keep pace with demand. At the same time, because of the challenging economic climate, the industry is keen to improve margins by keeping a tight control on costs, which include land, materials and labour, whilst attempting to meet rigorous environmental legislation to improve energy efficiency in new homes.
The authors forecast that the total housebuilding market will face another challenging year in 2011, as public-sector spending cuts take effect and consumers face continuing economic uncertainty. The key driver for improvement through to 2015, therefore, is likely to be private-sector housing.
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