Are house builder CEOs fit for purpose?

Is the size, design and more importantly, build quality of new homes getting any better? Judging by the number of complaints they receive and various online comments the answer is a resounding NO! Only this week a Bellway Homes buyer was forced to move out of his house because it was declared structurally unsound after an incorrect (weak) mortar had been used. A Taylor Wimpey buyer could not move into his new home for TWO MONTHS because of the extent of snagging defects included potentially dangerous electrical installation. According to the unfortunate new home buyer, a Taylor Wimpey regional director even told him that “we’re here to deliver profit for our shareholders” adding: “we don’t build perfect houses”.

Whilst planning and building regulations stipulate minimum standards, it would appear that no house builder is prepared to go beyond the absolute minimum quality standards. When a new home buyer complains they are often referred to the NHBC’s booklet “A Consistent Approach To Finishes” and told that it is “within tolerance” The author has written to Persimmon’s Jeff Fairburn, and Taylor Wimpey’s Pete Redfern to ask what measures they are personally going implement improve the quality of their product. Neither has replied!

So with CEOs apparently only driven by profit and share prices, we thought it would be worth a look at examining whether those who are in charge of Britain’s largest plc house builders are in fact, fit for purpose. It can be seen that with one exception, they have not had a University education. In addition, only three have any experience of actually managing a building site, two of these actually started their own companies!

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Mark Clare Barratt CEO wants even more help for house builders

Unsurprisingly, Mark Clare is a big fan of Help to Buy. In an interview with the Mail on Sunday he said:   “The ability to buy homes with a 5% deposit is creating confidence in the housing market after years of uncertainty going back to the financial crisis in 2008. We are seeing queues outside our showhomes”

Mark ClareClare 56, believes the market was already picking up, even before Help to Buy with demand being boosted by signs of a general economic recovery.   Barratt recorded a record 73.7% rise in underlying pre tax profit to £192.3 million in the year to the end June 2013. The average price for a Barratt (privately-sold) home also increased to £213,900. In their Interim Statement last week, Barratt confirmed sales are up by 47%. 

Mark Clare, a graduate from Portsmouth Polytechnic, has a background in accountancy. After 12 years at British Gas he joined Barratt as CEO in October 2006.  In April 2007  he oversaw the £2.7bn acquisition of Wilson Bowden, which included the David Wilson Homes brand – just a year ahead of the global financial meltdown and the total collapse of the housing market created by the ‘credit crunch’. The company’s share price collapsed from 954p in August 2007 to just 39.5 in less than a year.  A Rights Issue was required to raise additional funds from shareholders to keep the company afloat.    Not a great start in a new job was it? 

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Help to Buy a helping hand to another house price bubble and crash

The coalition’s Help to Buy scheme is nothing short of taxpayer-funded electioneering. The only people who openly have a good word to say for it are politicians, house builders and estate agents. Everyone else can see it for the cynical disaster in waiting it is. With an election in 17 months time, the government is hell bent on helping house prices rise until then.  Any economic growth will be based on debt, as home owners feel better off due to rising property prices and start spending again – it is the same old story. But this time, it will be the British taxpayer left without a chair to sit on when the (low interest rate) music stops. 

P1000335Help to Buy (1) Equity Share, subsidises the cost of new homes by up to 20% and has even boosted the prices of older homes as it gave the market a psychological shot in the arm.   It is said that Help to Buy is only supposed to be a temporary measure, designed to help people buy a home until the banks start lending again, but the evidence is that they already are!   Help to Buy (2) Mortgage Indemnity, is not really needed, it will make very little difference to mortgage availability and does nothing except give the lenders an additional 15% comfort zone for potential losses on loans they would have given anyway, all at the expense of the taxpayer. 

Help to Buy (1) has resulted in house builders building more homes. Why wouldn’t they?   They have a ready supply of subsidised buyers, they are reporting record reservations and profits whilst increasing average selling prices, some by as much as 11% in the last 6 months, without any loss of demand. 

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Redrow are whinging about planning conditions – again!

Earlier this week Redrow reported that the company is making “good progress” as a result of the Government’s Help to Buy scheme. Private reservations for the financial year to date are up 52% at 1,400 homes, with Help to Buy reservations representing 35% of total private sales over the period. The average selling price of private reservations is 11% up on the same period last year, at £271,000.  

Redrow reported that they have increased their current land bank, (land with a planning permission) both owned and contracted, by 2,000 plots to just over 15,000 plots in total – well over five years supply, based on their 2012 total completions. 

Despite this, Redrow used the interim management statement as yet another opportunity to lobby for a further relaxation in planning regulations and conditions. Whilst acknowledging that the growth in the company’s land bank over the last two years had been helped by the changes in the planning system, brought about by the NPPF, Redrow stated that over 5,000 plots are,

“in the planning system awaiting reserved matters approval or clearance of pre-start conditions. The regulatory burden involved in obtaining detailed permission and clearing conditions is the biggest constraint to the industry increasing production.”

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House builders to be forced to build new homes or lose planning permission

The planning minister, Nick Boles has announced plans to change regulations as part of a Coalition drive to accelerate construction of new homes. The move to force developers to start building homes or lose planning permission is designed to prevent land banking, where house builders hoard plots whilst they wait for house prices to rise.

This is the government’s response to Ed Miliband’s “use it or lose it” speech during the Labour Party conference in September, when he said that developers would have land seized if they failed to build on it. Under the proposals, if building work is not commenced within the time scale set by local councils, three years in most cases, house builders will be required to reapply for planning permission. 

The new rules will give local people another opportunity to object, especially to controversial developments. Currently house builders are able to “roll over” approvals granted on undeveloped land indefinitely. There are over 500,000 sites with planning permission, with work yet to start on over half of them.

Mr Boles confirmed that the Coalition had scrapped a temporary measure introduced by the previous Labour government “which allowed developers to roll forward their planning permissions. This ending of the measure will increase the incentive for developers to start on site before permission expires.” 

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Persimmon and Bovis benefit from Help to Buy

Help to Buy GraphicblogPersimmon has confirmed it has sold over 3,000 new homes under the government’s Help to Buy Equity Loan scheme launched in April. This  equating to approximately a third of the group’s total completions in 2012.

The second, and more controversial, part of Help to Buy was brought forward and launched in October, offering indemnity guarantees to lenders for their 95% mortgages for new and existing homes. Many are saying the scheme risks causing a housing bubble. 

Persimmon confirmed that the impact of Help to Buy (2) mortgage indemnity, had “been muted due to the higher level of interest rates being charged with only a limited number of lenders involved in this second phase so far.” They anticipate that sales supported by these guaranteed mortgages will increase as interest rates begin to reduce as more lenders enter the market over the next few months.  

In a statement Persimmon said: “We believe mortgages associated with the Help to Buy equity loan scheme will remain the preferred choice for the majority of customers of the house building industry given that interest rates for this product are significantly more competitive than those available with the Government guarantee.” 

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NHBC say new home buyer’s feedback is increasing

NHBC LogoThe National House Building Council’s (NHBC) Annual Review 2012/13 announced survey results showing of 29,330 new home buyer’s, 91% are ‘very’ or ‘fairly satisfied’ with the quality of their new home and the same number would recommend their house builder to a friend. The NHBC claim “with another year-on-year increase, these levels of customer satisfaction still match or exceed those in almost any other industry or sector and are testament to the industry’s commitment to deliver quality new homes that meet the expectations of their homebuyers.” 

HBF 2013 5 starHowever, the “increase” is just 1% more than the HBF 2013 survey results from a sample size of just 20,313. The HBF survey represents barely a fifth of the total number (109,730) of privately sold new homes built in the survey year, which is hardly representative. 

The NHBC claim to send out over 100,000 questionnaires annually with a response rate was between 50 and 75%. They have now also launched a new online platform enabling participating house builders to easily review their feedback in much more detail than before and they can also compare their customer satisfaction scores with those of their competitors. The platform also gives builders opportunity to add a number of bespoke questions to the surveys, allowing them to change the questionnaire to meet their own specific requirements. 

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How to protect your home from storms

Winds strong enough to cause damage to property are fairly rare in the UK. When a severe weather warning is issued in your area it is a good idea to take some sensible precautions to protect your home and property.

Autumn precautions and maintenance measures to take:

  • Check your fences. Most home insurance policies specifically exclude storm damage to fences. So before the autumn weather sets in replace and loose or rotted fence posts, repair panels and replace rotten gravel boards. Ensure all panels are securely fixed to fence posts. It is a good idea to add screw the battens on fence panels as this makes them stronger and prolongs the panel life.
  • Make sure that your guttering, drainpipes and overflow pipes clear of debris and leaves and check they are securely attached to the building.
  • Regularly inspect your roof for damage, loose or missing tiles and broken or missing pointing and any dislodged lead flashing. Even if it appears minor, ignoring small items like a missing tile may provide a weakness meaning any storm damage is likely to be much more extensive if it is not attended to beforehand.
  • Storm damage BirminghamInspect any trees on your own and neighbouring properties. Cut off any branches and dead areas, likely to be dislodged by a storm. Cut down any dead trees. However do not touch and trees that are protected under a tree preservation order but write to the council and ask permission to get a tree surgeon to do the work.
  • It is best if the TV aerial is located inside your roof space. If it is not consider this but as a minimum ensure it is securely fixed so that it doesn’t come loose in high winds. Also be sure to check that what it is fixed to is also secure! 

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Beware if buying a new home off-plan

With the increase in demand for new homes being fuelled by the government’s ‘Help to Buy’ scheme, demand is exceeding supply and house builders cannot (or will not) build them fast enough. As a result more people are buying ‘off-plan’ to secure their new home.  Off-plan is the term used to described buying (reserving) a new home before it is built, purely on the basis of the builder’s brochure, construction plans, specifications or scale models, rather than after viewing the actual property or even a representative show home. 

digger blogNo show home, no problem.   Most house builders like to be able to show they have sold a few plots prior to the show home opening.  It can give potential buyers confidence and the impression that the development is popular or offers good value.  It is common for prices to increase, often quite markedly, when the show home is available to view, as buyers will be able to properly assess the quality and specification of the homes. 

“Early bird” or “up-field” reservations.

House builders normally release a limited number of plots at any given time, in certain order. This is because they need the development to be completed in a particular sequence, usually for pricing, presentation, access and perhaps safety reasons. “Early bird” reservations are not strictly the same as buying ‘off-plan’ as you are not actually buying or reserving a particular home, you are pre reserving a right of first refusal once the plot is priced and released for sale. Keep in mind that the prices subsequently released could be higher, as the builder will already have a registered interest in that particular plot. House builders like the early bird system as it gives them the best of both worlds: a list of would-be buyers ready to pounce as soon as plots are released for sale, whilst they can also take full advantage of any price rises in the market since the early-bird reservation.

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Buying a new home? How to choose a snagging inspector

There are many firms and individuals that offer so-called professional snagging inspections. Some even refer to historic TV appearances. So how do you decide?

SnaglistNew home buyers need to ensure that the inspector who will be snagging their new home is qualified and experienced and not sub contracted out to a local ex-site manager or finishing manager who cannot currently find a job – the very people who have now made professional independent snagging a necessity!

Cost – Most people’s first consideration. However, apart from making sure any VAT is included in the price cost should not be the primary factor. Most snagging companies charge similar fees anyway. You should not be asking yourself can I afford this, rather than, can I afford not to!

Is the inspector competent?

  • Check the qualifications and experience of the inspector who will be doing the inspection.
  • Can the company provide any testimonials or historic snagging reports as examples?
  • Does the company’s website feature a list of their inspectors along with details of experience and qualifications?
  • Do the inspectors have a thorough knowledge of the latest building regulations and NHBC standards?
  • Are employed inspectors properly interviewed and assessed?

Check the level of service

  • Does the company have trained and knowledgeable staff in an established office? People who are able to provide help and advice over the telephone, not just for the initial inspection, but throughout the two year warranty period.
  • How quickly are they able to carry out the inspection and produce a professional report for the builder to action?
  • Do they offer nationwide inspections or are they just in a particular county or area?
  • Are they able to carry out inspections, even if the house builder or site manager initially refuses access?
  • Does the fee include re visiting the home to check defects have been dealt with or is this only available at extra cost?
    Does the service provided include dealing with any problems or disputes with the builder for the full 2-year warranty or does it just provide a one-off inspection report?
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