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Memorandum from National House-Building Council (NHBC) (CRED 41)
NHBC welcomes this Communities and Local Government Committee inquiry, Housing and the Credit Crunch.
NHBC's role is to raise the standards of new build homes and provide consumer protection to homebuyers. Within this, NHBC is committed to sharing its unique data with the wider industry and stakeholders. Given our commitment, this submission provides the most recent statistics which represent a unique source of detailed up-to-date information on new home construction and the housebuilding industry. Much of our data is available well ahead of the Government's own statistics.
Our figures relate to new homes registered with NHBC for its ten-year warranty, which represent in excess of 80 per cent of all new homes built in the UK and includes data on new home registrations, new homes completions and average daily sales - therefore they can provide a valuable and early indication on market trends and the performance of the industry.
In addition to our figures, we have included some comments on other aspects of the housebuilding industry where they are appropriate to the inquiry's deliberations.
1. Introduction
2. The Government has in place two key housebuilding supply targets in England: to deliver 3 million new homes by 2020, and to provide 240,000 homes per year by 2016. Beyond these supply targets there is also a sustainability agenda culminating in the ambition for all new homes to be zero carbon by 2016.
3. In essence, in recent years, the Government has called on the housebuilding industry to increase supply of more affordable and more sustainable homes. These targets are mutually achievable. However, when taken together and taken in the context of current market conditions, meeting these targets becomes even more challenging. To meet the Government's supply targets will require double digit growth on year on year housing supply if the market downturn continues until 2010/11. During the market downturn and when the supply of new homes begins to increase, it is essential that quality of new home construction is not threatened by the drive to increase quantity. Summary Points:
o The number of new homes registered with NHBC to be built in the UK in September 2008 is down 56 per cent compared to September 2007
o Average daily sales of new homes in Great Britain has fallen to 380 in September 2008 from a peak of 854 in January 2007
o The mean price of new homes started in Great Britain has fallen from £253,000 in Quarter 2 of 2008 to £244,000 in Quarter 3. This is 4 per cent drop
o The full market forecast is 119,492 registrations for 2008 for the UK as a whole. To reach the annual target of building 240,000 new homes per year by the end of 2016 for England alone, volumes will need to be more than double those experienced during 2008 for the whole of the UK
Housebuilding: Supply
4. New Homes Registered
5. NHBC statistics have already shown that the number of applications to start building new homes in the UK decreased 56 per cent in September 2008 (7,055 registrations), compared to September 2007 (15,871 registrations). Because NHBC registration figures reflect an intention to build, they can give an early indication of market trends.
6. NHBC's UK Registrations per Month since September 2007
7.
8. It is possible to further breakdown these figures and highlight areas of particular concern. For instance, it could be of interest to the inquiry to note the differences in the performance of the housing markets in the four separate countries of England, Scotland, Wales and Northern Ireland. For example, the latest figure (September 2008) for England stands at 6006 registrations, as shown in the graph below. This is a slightly higher figure than that for August 2008, 5,851 registrations.
9. England Registrations per Month since September 2007
10.
11. Similarly, Scottish registrations increased slightly in September 2008 (594 registrations) compared to 351 in August 2008. However, this is still a sharp fall from October 2007's figure of 2,911 registrations.
12. Scotland Registrations per Month since September 2007
13. 14. Again in Wales there has been a fall in registrations over the last year, with (again) a slight reversal of the trend in September 2008 (275 registrations) as opposed to August's 111.
15. Wales Registrations per Month since September 2007
16.
17. Northern Ireland's registrations saw no such September 2008 reversal. The latest September figure for Northern Ireland recorded only 180 registrations in the month.
18. Northern Ireland Registrations per Month since September 2007
19.
20. New Homes Registered: Regional Breakdown
21. NHBC statistics are able to provide deeper analysis of the regional housebuilding trends. For example, the pie chart below illustrates the percentage of houses registered to be built in each English Government Office Region, out of the total starts in England in Quarter 3, 2008. These statistics are not yet available from any other source.
22. Percentage of Houses Started Quarterly in the English regions for Q3 2008
23.
24. NHBC's registration figures illustrate the extent of the decline of new house building through 2008. Current projections for 2008 are 119,492 for the UK as a whole, this is less than 50 per cent of the Government's stated target of 240,000 for England alone.
25. Housing Association: Private Purchase - Housebuilding Ratio
26. Given the Committee's interest in the operation of Housing Associations, it may be of use to note the changing proportion of new build commissioned for the social market as opposed to that for private purchase.
27.
28. GB Housing Completions
29. As well as tracking new build registrations, we also record all the homes registered with NHBC as they are completed. A home registered with NHBC is deemed completed when the NHBC building inspector, who carries out key stage inspections during construction, considers that the home has been satisfactorily completed in respect of NHBC's technical requirements. This is normally prior to (but generally signifies that the house is ready for) occupation.
30. Below is a graph illustrating the NHBC completions of new homes in Great Britain from 1996 to 2007.
31.
32. UK New Build Average Daily Sales
33. As well as recording how many new homes are completed and ready for purchase, NHBC also charts the number of new homes that are selling each month. The following graph depicts notification of sales of new homes, from forms returned to NHBC by first purchasers' solicitors. Sales are recorded in the month in which NHBC receives the forms.
34. The average
number of daily sales of new homes in
35.
36. Mean Price of New Houses started
37. When
applying to register a home with NHBC a builder must estimate its selling
price. This table represents the mean selling prices in
38. As these figures are estimates they are subject to a number of uncertainties and anomalies. Nevertheless they are useful as an indication of trends over time.
39. Although the mean price of new homes started has dropped from £253,000 in Quarter 2, 2008 £244,000 to Quarter 3, 2008, it remains higher than Quarter 3, 2007 (£221,000).
40. 41.
42. Utilising the information provided by our registered builders, we are able to track the mean price of homes in the private sector according the type of property. The below table reports the percentage change in mean price for each property type by comparing our latest NHBC statistics for Q.3 2008 with last year's Q.3 2007 figures.
49. Percentage of House Types
50. The pie
chart below shows the percentage of different types of home started in
51.
52.
53. Modern Methods of Construction (MMC)
54. The market downturn will continue to put pressure on demand for affordable housing - and as and when market conditions improve, there will certainly be a need to supply a substantial number of new affordable homes in a narrow timeline. The use of more modern methods of construction to speed up production and delivery may be considered.
55. NHBC has a wealth of technical risk management expertise on modern methods of construction, and we would advocate building on the work of the Housing Forum demonstration projects programme both for modern methods of construction and the sustainability/zero carbon agenda.
56. The green agenda
57. The Government's target that all new homes must by zero carbon by 2016 is probably the most ambitious policy the house building industry has ever faced. NHBC is committed to supporting the Government and industry to successfully deliver zero carbon homes. However, based on NHBC's research and experience there remain some challenges that need to be addressed if this is to be achieved.
58. The issue of consumer confidence must be addressed to prevent a situation in which builders could build zero carbon housing without sufficient market demand for them.
59. We are concerned that the attitudes of consumers are not fully understood at present. Not giving sufficient recognition to the views of these future home purchasers could undermine the efforts to meet the 2016 target.
60. The study from our research organisation, the NHBC Foundation, found that the majority of homeowners are not ready for zero carbon homes. Zero carbon: what does it mean for homeowners and housebuilders?[1] delivered an important message to industry and to Government - that the 2016 zero carbon target is as much about the needs of homeowners and purchasers as it is about providing technological solutions. The survey found that only 19% of respondents favoured the visual appearance homes that have recently been built to deliver high levels of energy efficiency and only 6% believed the additional cost of a zero carbon home is reasonable given the money they will save in energy bills.
61. The purpose of commissioning this unique and ground-breaking research was to provide valuable insight into the psychology of homeowners and their attitudes towards environmentally friendly housing in order to identify issues and potential barriers to achieving the 2016 objectives.
62. The successful implementation of microgeneration and renewable energy technologies is vital if we are to ensure that the work of the house-building industry matches the Government's aspirations. However, we must ensure that consumers of the future do not suffer from short-sighted decisions and the failure to use technology in the right place and for the right reasons.
63. The NHBC Foundation published A Review of Microgeneration and Renewable Energy Technologies[2]. This research was commissioned to ensure that builders and developers understood that not all microgeneration options that were currently available would be suited for each and every housing development.
64. It is important that the sector is allowed to make informed choices, based on sound science and safe technologies, backed up by effective testing and accreditation systems.
65. NHBC provides over 15,000 days of training[3] to the industry each year. The courses are run both in-house for the larger construction companies, and as open courses, allowing smaller builders to attend as and when they are able.
66. The purpose of our training service is to offer a comprehensive range of training and development programmes to homebuilders, to directly support NHBC's standards raising and risk management roles. Also, we aim to support home builders in the drive for the fully qualified workforce and improved health and safety in the industry.
67. The zero carbon agenda represents a major step change and will have a major impact on skills as new technologies and building practices will need to be introduced.
68. Our experience of previous step changes in building technology is that they can lead to a 'wave of error', principally due to problems with installation and sitework, rather than to design errors. With this in mind, for example, we are already looking at how and where to incorporate training on achieving increasingly higher levels of airtightness into dwellings.
69. Finally, as the leading assessor for Ecohomes and the Code for Sustainable Homes with growing experience of post construction experience, NHBC regularly shares best practice and knowledge on these areas through its Sustainability and Social Housing Forums
70.
o The
number of new homes registered with NHBC to be built in the
o Average
daily sales of new homes in
o The
mean price of new homes started in
o The full market forecast is 119,492
registrations for 2008 for the
o NHBC is committed to supporting the Government and industry to successfully deliver zero carbon homes. However, based on NHBC's research and experience there remain some challenges that need to be addressed if this is to be achieved
November 2008
[1] NHBC Foundation full report can be accessed via http://nhbcfoundation.org/LinkClick.aspx?fileticket=s3zCjoSY88s%3d&tabid=54&mid=385&language=en-GB
[2] http://www.nhbcfoundation.org/LinkClick.aspx?fileticket=UzYVWRQW%2fTY%3d&tabid=54&mid=385&language=en-GB
[3] www.nhbcbuilder.co.uk/consultancyservices/training
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