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National House Builders - are they bad for the Residential Property Industry?

10/07/17
Posted by: Tom Morris

National House Builders - are they bad for the residential property industry?

As controversial as it may be, I personally think that the big national house builders are having a negative impact upon the house building industry and the new homes target we as a nation are looking to achieve (250,000 per annum).

I have seen several mergers/purchases of house builders over the years (Taylor Woodrow & George Wimpey, Barratt & David Wilson, Cala & Banner Homes, Countryside properties & Millgate Homes etc.) and I would argue that none of these have been of benefit to the house building industry and general house buying public. The true winners are corporate shareholders who have gained economies of scale and thus, can to purchase large land banks at discounted prices.

There are now only a handful of national house builders and whilst we are now producing the most amount of new homes since 2008, we are still a long way off the 300,000 per annum target the House of Lords Economic Affairs Select Committee identified in its Building more homes report. I don’t believe that the big national house builders want to reach this target and it is not in the shareholders best interest to do so. With less stock, they can artificially keep prices high (and, thus keeping margins higher) and can also control the flow on available land.

Sadly, the quality of homes being built has dropped significantly and every month we are hearing of a rapid increase in complaints to NHBC, with a number of these squarely lumped onto the desks of the national house builders. In some cases homeowners are forced to sign Non Disclosure Agreements (NDA's) prior to any repairs taking place, ensuring neighbours and media, in theory, never find out about the issues.

From a career prospective, I have seen a massive change in the past 12 years I have been recruiting in the industry. Most candidates used to aspire to work with the national house builders and be part of a larger machine as they viewed the big boys as a platform for career progression and development. However, a stark contrast to today’s candidate, where most people are cautious and view the large nationals as a last resort. The shot gun hire and fire culture that is emanating from the them means candidates fear they will be expendable at short notice and with regions opening and closing at a blink of an eye and strategies change constantly, candidates are sceptical of longevity and security.

To diversify the market and to enable growth, I believe that we should be looking at breaking up the large house builders to enable the UK to build more houses, at a much higher standard.

The small and medium house builders up and down the country that are often privately owned, are the back bone of the house building industry. I believe they need to be supported and encouraged. The best talent now tends to flock towards the smaller, private companies as they provide an autonomous and exciting platform in which candidates can be more than just a number in the boards game of restrictive chess.

I am not anti-national house builders by any means, but I am of the opinion that their shareholders end goals differ massively from what the industry needs and the UK population desires - more quality and affordable home