What the future holds for housebuilding

While construction activity is starting again at some pace, Shoosmiths has taken the opportunity to speak to a number of contacts in the housebuilding industry to get their thoughts on the initial and longer-term impacts of COVID-19.

It comes following summer forecasts from the Construction Products Association which reveal developers have been focusing primarily on existing housing schemes and are predicting a 60% fall in new housing starts this year.

Site operations

Getting back on site safely has been the key priority. Generally, it has been easier to return where sites were either at an advanced or very early stage where jobs can be carried out sequentially, which makes it easier to manage social distancing restrictions.

Practical steps are being taken to comply with social distancing restrictions. Most clients are finding that daily life on sites has adapted well with measures to increase welfare facilities, providing PPE and washing stations, marking clear one-way routes, checking temperatures of staff and visitors and even some supplying their contractors with sensors which beep if you stray within 2m of another person.

Interestingly, one of our clients, Seaward Properties Limited, has been able to keep one of its sites operating throughout lockdown, as this site was at an early stage and social distancing was maintainable. It was also able to stockpile materials (always ensuring resources were not taken from other essential infrastructure projects) so that construction could continue.

Looking to the future, the project management of sites and strategising the build programme will become more crucial than ever. Site operations will need to be carefully planned and delivered to the highest standard the first time, as the requirement for trades to work over each other for remedial works will be difficult to accommodate while social distancing restrictions continue with the competing requirement to deliver sites on time.

Supply chain

As factories entered lockdown and output fell, there has been an inevitable impact on the supply chain, with developers being unable to source fundamental materials such as plaster and smoke vents.  Let’s also not forget that there will also be an increased demand and cost to developers for PPE and signage for sites the longer that social distancing restrictions remain in place.

William Kyle, fund director at PFP Capital Fund, highlighted the impact the wider supply chain will have on construction sites in the long-term. He told us: “With so much of the component parts of a modern home coming from a factory, this has the potential to be more disruptive than the site based element...Our impression is that everyone wants to get back to full capacity fairly quickly, but the enclosed factory environment may be more impacted by the new COVID health and safety measures than a site.”

What’s next for housebuilding?

Construction is showing signs that it is stepping up to the government’s mantra of build build build and is carrying on, despite the impact of COVID-19, although inevitably at a much slower pace than before.

While developers get to grips with the new restrictions, these have led to increased build costs and slowed productivity. If the restrictions are here to stay in the long term, developers will need to adapt to the more controlled environment to ensure their build programmes are future-proofed to accommodate social distancing regulations and delivering houses on time and on budget.

Ultimately, for those we spoke with, although the impression is that construction sites are adapting well to the changing landscape, albeit slowly and less profitably, the main concern remains the uncertainty of whether there is sufficient ability for house buyers to buy, despite the short-term incentives being offered by the government to stimulate house buying via SDLT relief and the help to buy scheme.  This concern is justified, given the HBF’s recent briefings that show mortgage products available for high loan to value buyers are down 95% on pre-crisis levels, and there are forecasts that completions will fall by 36% this year. Conversely though, there are rumours that plot reservations for new builds are remaining at a good level for some developers.

So, while construction is up-and-running again, mainly in respect of existing sites, it will be interesting to see what the next 12  months will bring and whether being back on site will help to stimulate the revival of the housing market.