James Parker, editor of Housebuilder & Developer magazine looks at the likely impact of Brexit on the housing market
Far be it from me to be downbeat, but the news just before a General Election, and just before the UK embarks on the most important international negotiations for decades, that the economy is in trouble is not exactly ideal. The recent figures from Canada confirmed that the UK has the lowest growth (together with economically challenged Italy) in the G7, which will not give the next Prime Minister a spring in the step to say the least when negotiating.
In our own sector there has been further bad news, just when Brexit cheerleaders didn’t want it. A week before the General Election, Nationwide announced figures showing that house prices had fallen for three consecutive months, and this hasn’t happened since the doldrums of 2009. This prompted the lender to say this showed the housing market was “losing momentum.”
I predict that just finding the people to build the bare minimum could be the big challenge for the next few years.
Nationwide thinks that a major cause is the sustained weakness of the pound has put a squeeze on household budgets. The cost of living is increasing as import costs rise post-Brexit, and wage growth is not keeping pace.
The pushes and pulls within the economics of the housebuilding sector are somewhat at odds with addressing this unfortunately. Nationwide essentially said the current shortfall of housing supply was helping keep prices stable however, but this is at odds with those clamouring for the huge uplift in supply needed to deliver the magic million homes. The idea that builders will voluntarily build thousands more houses only to see their values drop in the current market is fanciful.
And we know that the other ‘push me pull you’ in construction is the thorny issue of immigration. Political leaders may pledge to cut immigration to win votes but even leading Tories such as David Davis have admitted that levels may even need to rise further post-Brexit to support the economy. Research has found that 700,000 people will need to be recruited into the housebuilding sector over the next five years just to maintain current building levels of around 140,000 per year.
A high-end London housing developer (Great Marlborough Estates), was not being overly dramatic recently when it spoke out saying “cutting immigration will kill off the life-blood of construction.” I predict that just finding the people to build the bare minimum could be the big challenge for the next few years.