Building Industry Set to Soar

You have to admire the resilience of the housebuilding industry. It was less than six months ago that I was writing here about a significant and growing school of thought that the traditional housebuilding model was dead. To be fair, at the time I pointed out that many of those saying this did not actually like housebuilders very much, and perhaps were just hoping the model was dead. But nonetheless some intelligent commentators were adamant that the trader model was over.

So the news emanating from some of the big contractors is really quite remarkable - reservations are up, new sites are opening and firms are looking to grow again. Of course no one is pretending that everything is fine, and indeed all the contractors are going out of their way to stress that there are plenty of clouds on the horizon, such as the mortgage market, unemployment and the possibility of a Conservative election victory next Spring.

But housebuilders are back in action, looking to raise money by various means to reduce debt and to get involved in a land market which they obviously read to be ripe for re-investment.

This really is remarkable resilience from the industry and it is to be much admired.

However this new growth in the building market sees some subtle, and not so subtle, differences from what went before.

Firstly, there is a switch away from flats and back to traditional housing. Secondly, those in the construction industry are unlikely to embark on building large sites or significant regeneration schemes. Housebuilders are aware that they perhaps got carried away by the volume game before the collapse came, and they will not want to make the same mistake again in a hurry. They have brought their overhead down, cut their cloth so it is appropriate for a lower level of output, and that will be the game for some while.

The effect of this will be that it will take a long time before new home construction returns to the levels that we saw in 2007.

A report published in late September estiamted that England faces a 1 million home shortfall by the end of 2010 - this looks set to get worse before it gets better.