Today’s news that UK housebuilding activity has fallen at the fastest pace in nearly three years does not bode well for efforts to ease chronic shortages of residential accommodation, but the yawning gap in affordability is not strictly a matter of limited supply.

The latest slide in activity has in part been ascribed to March’s exceptionally wet weather, but other storm clouds are gathering around the industry. The economy is on shaky ground, consumers are fighting to stay afloat amid surging inflation, interest rates are on the up, and credit conditions are tightening for both individuals and businesses.

A further crucial factor was the end of the government’s decade-long Help to Buy scheme on March 31, which assisted those struggling to save up a deposit towards a new home.

According to latest figures from Nationwide Building Society, UK house prices fell last month at the fastest annual rate since the aftermath of the 2008 banking crisis. Yet the average price nationally is still hovering around £294,000, and anyone earning an average annual salary of £33,000 can expect to borrow no more than something in the region of £140,000 – which leaves a considerable shortfall.

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This would appear to bolster arguments from the likes of the Home Builders Federation, which is calling for a new “targeted” scheme for first-time buyers. However, it’s important to note that Help to Buy has been a key component in a remarkable boom in profitability as housebuilders have increasingly focused on financial returns rather than volume targets.

A 2021 study by researchers at Sheffield Hallam University found that prior to the financial crisis, each completed dwelling netted an average pre-tax profit of about £30,000 across the UK’s nine largest housebuilders. By 2017 that had more than doubled to £62,000, a trend that continued until lately.

During that same period, dividends paid to shareholders by these companies surged from an aggregate of £400 million to £1.8 billion.

Help to Buy relieved builders of the need to offer margin-eroding sales incentives, and in the process transformed their profitability. The market now looks set for what could be a considerable correction, which is why housebuilders’ share prices have been sinking despite having in recent weeks reported robust figures for 2022.

Unfortunately, there is now less urgency around the number of new homes being built following a watering down of what had been a mandatory target of 300,000 completions annually in England. Official data from the Scottish Government shows that targets here are also failing to be met.

The best bet for increasing the number of completions would be a long-overdue revamp of the planning system, along with substantive efforts to alleviate labour shortages. As for prices, there is clearly scope for housebuilders to cut their cloth according to emerging market conditions.

Harper Collins snaps up small independent publisher

 

HarperCollins UK has announced it has acquired award-winning Edinburgh children’s publisher Barrington Stoke. The company, founded by Patience Thomson and Lucy Juckes in 1997, publishes dyslexia-friendly fiction and non-fiction by a stable of highly acclaimed authors and illustrators.

Scottish football business looks to score big

 

A young East Ayrshire entrepreneur is hoping to further expand his football and fitness business after accessing funding for a new gym and astroturf facility.

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