Housebuilding and the New Homes Market: A Survey


An ISR Technology, management & business growth study


Commercial housebuilders are in competition not only with other housebuilders but also with the suppliers of a massive stock of used homes.  To sell, new housing products have to be in better locations, more satisfactory in terms of size, space and amenities, better looking, sturdier-built, and offer better value for money all around than older existing properties on the market. This widely used business managerial and economic study provides a detailed account of modern housebuilding and the new homes market. The book covers the factors affecting company growth, competitiveness, and innovation. It surveys general industrial-commercial trends and issues and reviews significant technical-product developments. Finally, it analyzes key influences on demand, prices, and business success in the main new homes sub-markets as well as the market as a whole.

Thumbnail Housebuilding

CONTENTS

1. Housebuilding and the New Homes Market: an Overview

Business-economic, managerial, political-legal, and other trends and issues in housebuilding* Company growth and performance* Technology, production, and innovation* Markets and marketing*

2. Housebuilding and Land (1): Economic Aspects

The growth in importance of land in total housebuilding costs* Land supplies, demand, and prices* Factors affecting housebuilders’ demand for land* Statistical data and forecasts*

3. Housebuilding and Land (2): Political and Legal Influences

Political and legal influences on the supply of land and housebuilding: an overview* Urbanization controls and their negative effects* The costs of the Green Belts in the UK: statistical data* Proposals for liberalizing reform of the planning system* Contrasts between Britain and the United States*

4. Housebuilding Materials and Components

Prices and demand trends* The major products* Recent supply-side changes and improvements*

5. Labour, Employment, and Training

Labour shortages and recruitment problems in housebuilding: firms’ responses to them* Changes in employment patterns and skill requirements* Recent advances in training methods*

6. Financial Investment, Company Growth, and Profitability

Housebuilders’ demand for finance: changing requirements* The main sources of investment finance* The major factors affecting the growth, performance, and profitability of housebuilding firms*

7. Size of Firms, Economies of Scale, and Diversification

The size of housebuilding firms in the UK* Economies of scale and diversification: benefits, costs, and risks* Case studies*

8. Technological Development, Production Organization, and Product Innovation

Traditionality and innovation in housing products and housebuilding methods* Modern low-cost housebuilding techniques in Britain and overseas* Recent advances in materials and methods* The GE Plastics model house* Computerization and JIT*

9. The New Homes Market, Demand, and Prices

Market-economic influences on firms’ outputs, growth, and profitability* Regional variations* Housing market recession: causes, consequences, and firms’ responses* Sources of new housing demand* The homes improvement market*

10. Marketing New Homes

The main house selling points* Housing sub-markets and women’s role in new homes buying* House prices and value-for-money* Quality control and assurance* Design and aesthetic appeal* Selling first, building later* Spaciousness and facilities, fixtures, and fittings in new homes marketing*

11. Sub-Market Trends

The main housing sub-markets and sub-market trends* Local-regional sub-markets* Buying versus renting* Marketing different types of housing product to different types of household consumer* Retirement housing*

PRICE & SPECIFICATIONS


Print book

Second edition 2009. New impression 2011

ISBN 9780906321454

127 pages

Hardback

Price £98.95 including free postal delivery

E-book

E-book price £16.15 (British pounds 16.15)

E-book ISBN 9780906321560


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SAMPLE PASSAGES

As in the past, how much new housing/housebuilding land will be required now and in the future will depend on a combination of demographic factors and rates of new household formation; rates of economic growth, employment, and income levels; and levels of immigration/emigration.

The distribution of demand for new housing will also tend to vary considerably from one region to another.

Based on current trends, the forecast in the 1980s was that an additional two million or 11% more households would form in England by the end of the century. The prediction was that rates of household formation would be highest in the South East and East Anglia (14% and 21% respectively). The expectation was that the existing South East population would expand by a further one million in total, with about 600,000 new independent households forming.

However, all such forecasts were liable to upsetting by significant changes in such variables as:

1. patterns and levels of economic activity;

2. households’ preferences, expectations, and demands as regards house prices and value for money, location, size, and facilities (etc.); and

3. immigration.

On this last score, it was expected that the demand for housing in the South East would be substantially increased by an unknown number of foreign immigrants (perhaps one million) settling in the region by the end of the century… (pages 12-13)

Over the years, central government had increasingly been obliged to subsidize local councils and was keen to save money in this area. It had passed legislation to encourage local authorities to demand cash, public goods and services such as schools, libraries, and play centres, and subsidized low-cost (“affordable”) housing from private housebuilders in return for merely carrying out their normal business.

As said, this development tax or tariff was a major factor hampering the supply of new homes into the market. The housing economist Alan Evans suggested that if housebuilders were to go further and offer direct financial compensation to residents for the loss of open views or other positive externalities, this might reduce local community opposition to new homes.   However, such payments could actually increase rather than diminish obstacles to new housing. Residents would naturally want as much compensation as they could get. Not only would this increase the cost of developments. In a free market democratic society operating under the rule of law, it is illegitimate and unacceptable to subject businesses to arbitrary taxation and demands for compensation by local interests.

New housing brings in new residents and thus extra revenue as well as increased demand for local public services. If council taxes do rise because of new housing or other developments, this may indicate inherent structural problems on the supply and/or demand sides for public services. Selling public undertakings to private firms and introducing regular commercial charges might be the only remedy… (page 37)

The average conventional house uses about twenty tons of cement in the form of mortar for bricks, and concrete floors, inner wall blocks, foundations, roads, and sewers (etc.). Housebuilders may account for some 15-20% of total market demand in the UK. However, the quantity of cement used in housebuilding is still small by comparison with industrial-commercial building. Up until the late 1980s, the major manufacturers had kept cement prices artificially high through the operation of a cartel or common pricing agreement. Prices had fallen or stabilized with the breaking of this cartel. As in the case of other building materials, cement customers had also benefited from significant reductions in delivery times, increased competition from foreign producers, and more scope for negotiating price discounts on large purchases.

Stronger competition from Continental Europe had reduced the prices of most major housebuilding products – including bricks, cement, tiles, aggregates, glass, plastic, timber, and metals. Competition was now much sharper in terms of price and the range and quality of products available.

In the case of products such as aluminium cladding and curtain walling, wall tiles, advanced specialist ironmongery, and structural steel foreign producers had come to dominate the British market. The growth of indigenous firms had been stymied by many years of trade protectionism and technical-product conservatism all round in housing. There was comparatively little demand for innovatively designed homes produced through radically different production methods, materials, and components… (page 40)

Many large firms have been able to adapt effectively to the decline of the traditional apprenticeship system by recruiting young people locally to work alongside skilled employees at its larger sites. Novices have been able to learn bricklaying, carpentry, roofing, and other skills on the job and take formal lessons in fully equipped mobile training centres adjacent to the sites. Meanwhile, there has been a substantial increase in investment and development of adult training schemes in the industry to overcome shortfalls in numbers of young entrants. In the late 20th century, George Wimpey (e.g.) operated a dozen centres around Britain offering such adult training programmes.

However, the trend towards increased self-employment and independent contracting is likely to continue. Thus, the most effective solutions to the problems of recruitment and training in the industry in the longer term probably lie in the development of new cheap forms of fast training methods (including video-based distance learning) paid for by trainees themselves.

In this as in other industries, government has experimented with schemes for allocating special grants or vouchers to youngsters and others to enable them to obtain training from outside providers. Both publicly funded colleges and commercial providers have been keen to get direct and indirect training subsidies from the government. However, political manipulation, featherbedding, and time wasting have bedevilled many of the schemes. A good deal of taxpayers’ money has gone into mopping up/disguising youth unemployed caused by things like the high minimum wage tariff barrier to labour market entry and employment. It is generally better to abolish protectionist type obstructions to employment – and to buy and sell training products and services in the conventional way on the open market… (pages 43-44)

Government policy and legislation has been a significant influence on property investment and returns generally.

In the mid-20th century, there was widespread withdrawal of private property owners and investors from the rented residential market because of official rent controls and security of tenancy laws. There was a general shift in resources away from rented in favour of owner-occupied housing.

However, the demand for rented housing rose significantly towards the end of the century because of such things as:

1. the erosion of the value of tax relief on mortgage interest payments;

2. higher mortgage interest rates;

3. both strong and weak house prices – either of which could mean poor value for money for investors/purchasers; and

4. increases in government housing benefit subsidies to tenants.

Private investors and developers moved in to satisfy this increased market demand.

On the political-legal side, suppliers of investment funds for rented housing developments were encouraged by liberalizing reforms and the introduction of business tax incentives. They also felt more secure because of the establishment of new types of investment institution and modes of cooperation between building societies, housebuilders, housing associations, and other organizations involved in the rented housing sector… (pages 48-49)

By definition, industrial-commercial diversification involves a reduction of functional specialization. Firms move into new areas where the skills, knowledge, and experience of existing management teams (etc.) will be less appropriate. Product differentiation (consumer sub-market diversification, loss of specialization) also often involves the loss of significant economies of scale.

In addition, there may be problems in effectively integrating much more structurally-functionally differentiated organizations. The specialist divisions of large conglomerate organizations will require a significant amount of managerial, operational, and financial autonomy if they are to operate successfully. However, they can never have the independence of separately owned and managed companies.   On the one hand, they may lack the scale, experience, and resources of large established market-specialist companies – and on the other, lack the flexibility, local-regional and sub-market knowledge, and capacity to adjust to changing market conditions of niche market firms… (page 53)

Before many housebuilding projects get under way, computers can produce schedules of work and materials required. Separate production schedules might be prepared for each dwelling under construction on a site. Good computerized scheduling enables builders to take delivery of materials and components such as heating systems and kitchen and bathroom ware just-in- time. That is, these items can remain at the suppliers or in central warehouses until they are required. Just-in-time delivery is still far less widespread in housebuilding than in other manufacturing industries (including industrial-commercial construction). The comparative smallness and short duration of the average housebuilding project are constraining factors. However, with technical advances and lowering costs, the use of computers to enable the just-in-time delivery of even small quantities of materials and components in stages when required to one-off and small-batch producers is becoming increasingly feasible and worthwhile.

Both housebuilders and their materials and components suppliers might gain considerably from just-in-time delivery. Suppliers might often now work straight from architects’ drawings to estimate the quantities of materials and components that will be required. They can then contact their own wholesalers to have timber (etc.) cut to size, and schedule deliveries to and from them when required. Computer-aided just-in-time production and delivery offer considerable possibilities for all-round savings in the building and building supplies industries. It is possible to reduce the size and costs of inventories, and cut losses from on-site pilfering and breakage or the deterioration of materials because of prolonged storage and repeated handling… . (page 71)

Extending existing houses instead of moving to new ones could have various advantages for owner-occupiers. The latter avoided various costs and hassles involved in moving. Households did not have to pay estate agency and other fees or have to change wallpaper, bathroom suites, and kitchens. Neither did they have to spend time searching for a suitable new home. The care and money spent on maintaining the existing house over the years was not lost. Finally, owners could increase the size, facilities, and market value of their properties without having to move to a less suitable district.

In Britain in the late 20th century, expenditure on housing extensions increased under conditions of both relatively strong housing market demand/rising prices and static or falling house prices.

In buoyant housing market conditions, many low-to-middle income households were unable to buy larger properties on the market but could afford smaller properties with the potential for extension later. When house prices were rising rapidly, there also tended to be a good deal of investment purchasing of smaller older properties (especially those with generously sized plots) for extension and other improvement work that would significantly increase their resale value.

Extension activity also tended to be higher in periods of relatively weak housing demand and static or falling house prices. When trading houses was difficult and/or involved negative gains, householders would often prefer to stay put and improve their existing houses.

Overall, extension activity increased with increased availability of finance from building societies and other institutions. However, the imposition of value-added tax on extension work by professional builders had a generally negative effect. VAT-registered firms lost business to DIY householders, black economy operators, and others who either legally or illegally did not add this charge to their bills… (pages 90-91)

Finally, builders may incorporate various special facilities, fixtures, and fittings into new homes designed for older and disabled persons. These include:

1. low windows that afford full views of gardens and streets when sitting down;

2. easy-to-reach electric switches and waist-height plug sockets;

3. downstairs rather than upstairs toilets;

4. sunken baths and flat areas adjoining baths;

5. advanced automatic security devices;

6. flush thresholds, access ramps, and flat and easily negotiated approaches from roads and from garages to front doors. Such features are especially important for disabled people and elderly or infirm people pushing shopping trolleys and prams;

7. safe standing areas outside entrance doors which are also big enough to park and manoeuvre wheelchairs and trolleys (etc.); and

8. relatively wide rooms, doors, entrance halls, and corridors that facilitate access and manoeuvrability on the part of people with walking difficulties… (pages 113-114)

As far as the marketing of retirement housing is concerned, key selling points tend to be much the same as mainstream housing products. Like new homebuyers in general, retirement home purchasers are looking for physically attractive and spacious, technically high standard dwellings that offer them the facilities they require in the right location and are good value for money/competitively priced. Specifically and on top of this, retirement homebuyers tend to want:

1. dwellings that they can readily sell if they want to move on or raise money for personal care (etc.) purposes;

2. financial safety nets in the form of bursaries or other disbursements from charities and foundations – as distinct from state welfare benefits – for residents who experience difficulties in paying for accommodation and services;

3. friendly and informal, non-institutional social relations within communal homes;

4. good fresh food;

5. homes that are attractive and welcoming in appearance, with pleasant features such as log fires, antique furniture, and cool, chintz rooms;

6. a variety of buildings and other facilities in developments, constructed in attractive styles and settings;

7. company or privacy for residents, as required;

8. a mix of ages in developments, achieved through blending different types of accommodation and facilities and encouraging visits from young relatives and friends; and

9. access to external shopping and other facilities in nearby towns as well as the countryside/sea… (pages 124-125)