Circle of life

Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.

The UK housing market is like one of those plants with massive long, deep-set roots, that burrow away and puts up shoots all over the place. Yet it’s in a mess. Although to be fair, it probably always has been. Prices are always too high or too low, depending on which stage of the rollercoaster market you are at.

The big housebuilders either aren’t building enough, or they are building too many, depending whether you are trying to get on the housing ladder or trying to stop a development on the field down the road where you take the dogs on Sunday mornings.

The big housebuilders aren’t making enough money either it appears, or not for their shareholder’s and potential shareholders’ liking – Persimmon shares are heading towards their October 2023 low point, and that was lower than it had been for years, even during the Covid pandemic. Hardly surprising when the latest results show a 33% fall in house completions in 2023, sales down 27% and underlying profits down a whopping 67%. It’s not as though 2023 was a blip year, with things likely to U-turn in 2024, persimmon is expecting this year to be just as tough. Redrow and Taylor Wimpey too, although they both reported better-than-expected profits for 2023.

Why does this matter? What happens or doesn’t happen with housebuilding affects the national merchants or than it does most of the smaller independents – you only have to look at the Travis Perkins results to see that. I’m always meeting merchants who say they have little or nothing to do with the large housebuilders. Except it’s all part of the symbiotic whole. There are knock effects that go back up the supply chain to the manufacturers, and come back down again to merchants of all sizes.

The country simply doesn’t have enough homes, and the ones we do have are becoming increasingly unaffordable for many. Whether this is as a result of the national housebuilders colluding on prices, or holding back on building so they can shore up prices is up to the Competition and Markets Authority to find out in its investigation.

I can remember a friends’ sister and her new husband moving in with her parents in order to save up the money for a deposit on their first house. They stayed with them for about 10 months, saved the money, bought the house on a 90% mortgage and off they went. If they were to do so now, they’d be there for a decade before they could get that much on a deposit, especially in my corner of the south-east.

Not building sufficient homes for the population doesn’t just affect the first-timers. It’s called a housing chain for a reason, every bit links in with the one before it and the one after it. Without the churn coming from the bottom of the ladder, there isn’t enough impetus for people to move on, whether to upsize or downsize. Housing transaction numbers, far more than actual housebuilding, have far-reaching consequences for huge swathes of the economy: merchants, builders and manufacturers, sure, but what about estate agents, decorators, kitchen shops, conveyancers, curtain-makers, removal companies, those shops that sell knick-knackage for the shelf in your new living room, the takeaway business when you’ve had enough of unpacking boxes and just need food…

All of them businesses that rely on there being sufficient housing churn, all of them filled with people who require the business to thrive in order that they too can spend in the economy.

We don’t just need houses to buy, We need homes for people to live in. On of the problems with the market is that it has never really recovered from the Tory-vote-generating council-house sell-off of the 1980s. The Barker Review into the UK housing supply was published in 2004. 20 years ago. What’s changed since then…? Not enough.