Over recent months and years house prices have seen staggering levels of growth. The ONS House Price Index for January 2022 indicates that UK average house prices increased by 9.6% over the year to January 2022, with the average UK house price around £274,000 – some £24,000 higher than in the same month last year.
The reason appears to be grounded in the age-old issue of supply and demand. “The increase in property prices across the UK can be attributed to the gap in demand and levels of stock in the market”, said Andy Sommerville, Director at Search Acumen, commenting on the ONS data in March.
But while higher sales prices may be beneficial to housebuilders, the increase in the cost of materials will be a cause for concern. High levels of demand, logistical issues, Covid, Brexit, the war in Ukraine, rising energy prices and general economic inflation are all likely contributory factors – but whatever the reasons, construction costs are on the rise.
A similar story can be seen in the Repair, Maintenance & Improvement (RMI) sector, which was fuelled in the past couple of years by homeowners deciding to stay in their current house, but extending or modifying it. According to a recent survey by Checkatrade, costs of home improvements have risen by 17% compared to 2021, with the category of ‘building’ showing an increase of 39%.
However, Mike Rigby, CEO of MRA Research, which produces the monthly BMBI report regularly featured in PHPD notes: “with households now facing the highest levels of inflation for 30 years, it may be the end of the Repair, Maintenance, and Improvement (RMI) boom which gave the industry such a lift during Covid.” You can read the full report on page 12 of the April/May issue.
This may be a sliver of positive news for housebuilders. With a spectre of spiralling costs homeowners may postpone or abandon planned RMI projects thereby easing the levels of demand for materials in the market.
To manage rising costs housebuilders must be more focussed than ever on efficiencies. New technologies should also be considered. With all elements of society increasingly ‘digital’, developers also need to be aware of not only how these tools can help their customers, but also how they can also be used to drive their own business.
Despite the challenging times, SME housebuilders remain well placed to adapt and deliver.
