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High hopes for private housing in 2017 after jump in new starts

A sharp upturn in private housing starts over the Spring has given the industry an encouraging start to 2017 and should help sustain activity in the sector over the coming year. Despite uncertainty around Brexit and the prospect of a General Election next month, Glenigan data show private starts in the quarter to April were up 36% on the period last year and a third higher than in the previous three months. The expansion in private housing helped drive a 6% rise in overall project starts across all sectors of the industry.

Private Housing Starts

The upturn highlights private housebuilders’ faith in underlying demand, particularly for family units outside London and the South East and their confidence that low-interest rates and the Help to Buy scheme will enable them to maintain healthy sales rates on new sites over the Summer. The Glenigan Index shows that total residential starts rose 26% in the three months to April compared to the period last year. Meanwhile, Glenigan data showing that detailed planning approvals for private housing in the February-April quarter rose by 21% the period last year, suggests the momentum in the sector is likely to be maintained. 

Recent news from the major quoted housebuilders has reflected the optimism in the sector. Earlier this month Barratt Developments said market conditions remain good and the wide availability of attractive mortgage finance and Help to Buy continued to support ‘very strong’ consumer demand. Barratt’s private forward sales were up 22% on a year ago at 6,120 plots and its total forward sales stand at record levels. Bovis Homes echoed the message recently when it said demand for new homes ‘remains robust across all regions’ and pointed to some modest house price inflation. 

Yet a buoyant level of new private starts and volumes is emerging alongside a cooling in the general housing market. The latest (April), RICS UK residential market survey pointed to ‘momentum continuing to ebb’ with sales declining slightly over the month, new buyer enquiries edging lower and a mixed picture on house price inflation. Central London house prices have fallen for 13 months running and East Anglia and the North East have seen dips in prices. By contrast, more than two-thirds of agents surveyed in the North West saw house prices rising in the month and a majority reported rising house prices in the East Midlands and South West. 

The mixed regional picture in private housing activity is reflected in Glenigan figures. These show the value of private housing starts in the months up to April 2017 rising by 48% in the East Midlands compared to the period last year, by 30% in the South West and by 19% in the North West but falling by 26% in the South East. 

Buoyant housing RMI

A quieter housing market traditionally bodes well for the private housing RMI market as householders opt to repair and improve their properties rather than sell up. ONS figures show private housing R & M output in the first quarter was up 9.8% on the period last year.

The experience of the largest paving supplier Marshalls – which has a record order book after seeing a 13% rise in its domestic sales in the first four months - suggests the sector is also keeping busy in the second quarter.  

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