Sunday, May 18, 2008
Starts crash as builders down tools
Firstrung: House building crashes by 21% inside the past three months
House building crashes by 21% inside the past three months The latest national statistics on house building were released under the auspices of the UK Statistics Authority on 15 May 2008...Statistics in this release present figures on new build housing starts and completions in England. Figures for the UK and constituent countries are also available in the accompanying tables. The latest statistics report on the period January to March 2008 and update those previously released on 14 February 2008. Key points from the latest release are: There were an estimated 32,100 seasonally adjusted housing starts for all dwellings in England in the March quarter 2008, down by 21 per cent on the previous quarter and 24 per cent lower than the March quarter 2007.
29 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Wonderpup said...
Like the tumbleweed image- says it all really.
2. Doghouse said...
Am I being naive here, if so help me out...
new builds are not selling because the prices are still over-inflated, and apart from offering a few (pathetic) incentives, builders are not doing anything to encourage people to buy. I'm not a business person (e.g. like all of those really clever people who run the banks!!!) but if I had stock that wasn't shifting I would reduce the price...in line with what people would be prepared to pay. Surely building costs haven't risen in line with property selling prices, so builders must have been making a killing over the past decade. Surely they can significantly reduce their asking prices and still make a profit.
How can they afford not to reduce their prices, cos they must be carrying a lot of costs??
Okay, their existing stock isn't selling, so they are not building any more. Ermm, I thought builders were in the business of building...if they don't actually do that, how are they going to stay in business??? Are they expecting the 'slump' to suddenly end??? Are they scared of making a bit less profit than they used to????
Are they so entrenched in their mentality that every new phase they build has to be more expensive than the last???
Genuinely wondering if I have missed something here, so comments welcome.
3. inbreda said...
21% in 3 months? Wow!
By applynig the very same dubious trend analysis that the VIs have been using to show that house prices go up massively and always, I predict that...
...let me see...
...plus 4...
carry one...
House building will be down 84%!!!!! in the next year, which combined with the last 3 months means that they will be bulldozing houses at the rate of 10,000 a month by next summer.
Now that shoud be a headline on the Daily Express!
4. paul said...
In fact using Daily Express Logical Reasoning©®, house builders will be knowcking houses down by this time next year, and in 15 years, they will have destroyed all of the houses in the UK!
5. inbreda said...
"EVERYBODY IN THE UK HOMELESS BY 2010"
Daily Express exclusive. You read it here first
6. yorkshireman said...
Once one builder breaks ranks and starts to reduce the asking price, others will follow suit. Shouldn't have long to wait. Having said that, I would not care to be the first to start cutting prices.
7. plato said...
Doghouse
You're quite right in suggesting reductions in asking prices,under the circumstances and in view of relative building costs.
However their over-riding intention is to maintain property prices at a high level with the prospect of ever increasing prices to follow. Logic goes straight out of the window as the 'license to print money' attitude sloshes around in their limited minds.
All these vested interest parties that feed off this credit principle, have taken their big fat slice out of this market with relative ease and their worst nightmare is to lose this Golden Goose.
Hopefully people in general will have more sense and stay out of this declining market to a point where it does not indebt them for their whole life, but rather becomes an affordable necessity.
With this in mind : Those stubborn businesses refusing to be reasonable will be bankrupted through their own attitude, leaving more sensible and socially responsible principles within this market.
So it's very important that the public are not duped too early into this falling market. They have more time than the VIs.
8. Ash4781 said...
The builders buy up the land and monopolise the supply (they are leveraged). Now they are or are about to firesale land.
9. gone-to-colombia said...
Plato, I think you're right.
Though, I believe that we can count on the greed motive on the way down just as much as on the way up.
Why buy now when by waiting a little more will be bought for less.
When markets reverse the same mentality works, that is with additional fear.
10. Cheekie Charlie said...
Doghouse said..."Surely building costs haven't risen in line with property selling prices, so builders must have been making a killing over the past decade."
I've mentioned this on this site before but there were no taker's! It's an absolute scandal the press haven't taken on this subject!! After all it's common knowledge that a 500K house cost's no more than 150K to build and the recycled(environmental) building materials they use for construction! Well it's no wonder they only gaurantee them for 10 years. And as for timber framed buildings! Well you can't get a mortgage on some of the 50's/60's prefabs and these are no different.
11. Colin Camper said...
I thought the builders were paying sky high prices for land.
One of the few things the government could do in this situation is to buy up poor agricultural land, reclassify it and sell it to the builders at 45% of last summers' price.
12. converted lurker said...
I reckon the breaking ranks theory is right, they'll have to start having Florida style distress auctions (in the middle of Essex) very soon
13. plato said...
gone-to-colombia said...
"When markets reverse the same mentality works, that is with additional fear."
This is the risk or danger --------- I'm hoping for a complete change in attitude to take place,through this calamity, rather like s2r1's concept, but I am not so confident in human nature and realistically expect the start of another bubble. Let's hope we are not in the minority in seeing the futility of the housing bubble.
14. gone-to-colombia said...
Plato, how I wish it might be so.
Though, I very much doubt basic human nature will change.
I suspect that boom and bust is the norm. I wonder how far back we might be able to trace the statistics.
15. plato said...
g-to-c
This HPC is a modern phenomena borne out of ultimate usury, so we're probably in the process of making history. Could be a big change because of this fact.
This is all very complicated and really impossible to isolate ------ providing the reason for the many varied articles we're getting on HPC and causing apparent digression,or leading on to one thing after the other.
In this particular case we may be at the peak of HPC but events could defy all logic and this could be a blip. The future is very uncertain.
16. uncle tom said...
Doghouse,
If you look at the numbers from the big home builders, you will see that for the last few years they have been making a headline profit of around 20% on turnover - a very healthy trading position.
Look again, and factor in the timelag between buying land and developing it. and the capital appreciation of their 'land bank' in the intervening period, and you realise that the capital appreciation of their land holdings has been a major source of profit. The actual business of sticking bricks together seems less rewarding
Now, consider their position as property (and therefore land) values decline. With frightening speed, their profit margins evaporate, leaving them with the unenviable choice of either selling property at an outright loss, or pretending that it is still fairly valued and hope the market will pick up again.
The latter option has the obvious attraction that it gives the directors time to make sure they leave the sinking ship with as much loot as possible...
I have little doubt that we will see some big name developers go to the wall, my money being on Barratt to lead the way..
17. denzil said...
Doghouse:
Many moons ago I worked in the building trade and still have a fair few contacts in the business. You are right in that the builders "should" have been making excessive profits, considering how much more the houses they are building are selling for but the probably is that due to competition for building land the price of the land has absorbed the extra profit. Uncle Tom spelt it out above, i.e. for a builder who bought a plot of land quite a few years back he/she would have made more from just doing nothing with the land. The big problem, which will no doubt take a few big builders under is that a lot of land sold at top dollar just isn't worth what the builder paid and with the best will in the world will not yield a profit.
People I know in the trade, especially those tied up in new builds are in serious distress.
If land was easier to gain planning permission on then the price of land would fall considerably. I bought some land in Somerset (4 acres) in 2000 and I'm praying that one day I will be able to build on it.
18. Orcusmaximus said...
Doghouse, Colin Camper, A couple of pieces of wasteland in my area went up for auction 2 years back and I was shocked at how much they went for. A plot of land big enough for a block containing 4 2 bed flats and a 1 bed flat went for £200,000. Mind you, they then sold 4 of the flats for £688,000. According to nethouseprices.com, the 5th flat is still unsold.
19. Yerhavingalaugh said...
g to c @ 14
According to Fred Harrison he analysed 300 years of past economic activity in determining that there is an 18 year property cycle - 14 years of boom followed by 4 years of bust. His prediction (in 2005) of house prices falling in 2008 has proved to be spot on. However his prediction of recession in 2010? I reckon it may come sooner than this if global consumer spending collapses even quicker than he thought it would.
We never seem to learn the lessons of history. I suspect that those approving mortgage applications in 2015-2020 will be as wet behind the ears as their current counterparts and the next boom will be just as damaging as this one. Greed never takes a holiday.
20. mken said...
inbreda :
"House building will be down 84%!!!!! in the next year, which combined with the last 3 months means that they will be bulldozing houses at the rate of 10,000 a month by next summer"
As a matter of interest, this IS what is actually happening in the old East Germany. After a massive housing boom and bust in the mid 90s, the government is actually paying for whole areas of old living quarters to be demolished. The excuse is bad (communist) quality etc., but the truth is that they are trying anything to reverse the trend of plunging prices.
It always surprised me in this context to see "invest" in Berlin housing adverts.
21. jack c said...
Andy Brough who runs the Schroder UK Mid 250 fund (currently £2.38bn in size) several months ago restructured the fund (probably due to recent short term under performance) and in doing so bought into several builders, which many investors questioned at the time. He seemed to think that many represented good value or that money was to be made via merger and acquisition. Mr Brough is a highly rated and respected fund manager and has 10.6% of the top ten holdings in construction and materials with another 2.1% in Real estate, now he has either made a monumentally poor call or he maybe knows something we dont.
22. it_is_going_with_a_bang said...
They have been paying over the odds for the land in the first place
The 4 houses built next to my brothers house were built on land sold for £600k + by the owner. A bungalow was demolished.
4 houses for £250 k each.
but nobody is buying in 5 months now ...
i may add that the houses are tiny 3 bed houses. Yes you guess it they are called .... cottages.
the new term for a new build that has rooms so small u cant swing a cat in them.
Cottages my ar&se.
23. it_is_going_with_a_bang said...
Caroline Flint is talking absolute sh*ite.Shes also knows it isnt her target to worry about since she wont be there.
Usual government statement
1. Pretend a problem always happens ( i.e. its not our fault )
2. Point out that targets are not being achieved but merely say that this always happens with most things
3. Even then - its just not our fault - its because of the global market ....
4. Oh yes and fundamentals. ( despite the fundamentals actually being their fault in the first place - dam cheek ! )
5. Historically low interest rates bla bla arent we great at this ( which must be why when they go up a wee bit the whole country grinds to a halt - good work ! )
6. Its challenging but achievable. ( that would be a shift from we are going to do this ... to erm its still achievable... to oh look we didnt do it! )
Uselss lying politicians. Sick of them.
24. converted lurker said...
jack c which IB was shouting from the rooftops to flog builders shares a month or so back?
25. jack c said...
Converted - surely not Schroders?
26. converted lurker said...
Think it was Dresdner in feb 2008, then followed by Citibank in march, Merrill march/april. iirc Dresdner said dump 'em and quick.
27. gone-to-colombia said...
Plato, by its very nature the future is always uncertain.
I am not at all sure if the present HPC is a new phenomenon or just a continuation of the cycle.
One thing is certain which is that bubbles have been inflated and burst for hundreds of years, the Dutch bulb bubble and the famous South Sea bubble are two examples.
What we have now, if we are witnessing a crash, is another such bubble.
When any traumatic event happens what is recorded at the time contains truth, distortion and lies. That which is other than the truth is the background noise to the event, discarded later when a consensus view takes hold.
I cannot be certain but I firmly believe that we are witnessing a mamouth crash.
I can see no reason why this should not happen again and again, at around ten year intervals.
The only way to stop this is by government intervention in the form of new laws controlling the market.
There is a possibility that this might happen but I am not hopeful.
28. Doghouse said...
Thanks for the info everyone :-)
Oh yes, I hadn't thought they believed one of their costs i.e. land, is appreciating in value, or bargained for the short-termism mentality of directors.
Gosh, are they really that stupid that they would rather go under than admit that their market isn't 'worth' what they believe it should be. See, told you I was naive, I've seen through banks and EAs, but actually thought there was some industry left in Britain that was interested in still producing something...although I guess all they've been doing for the past few years is throwing up rabbit hutches for the BTL bandwaggon. Oh no, now I've got something else to be cynical about!!!!
29. jack c said...
Converted - thanks for the info - interesting to see who makes the correct call