We all know about the oft-quoted HBF survey question: “Would you recommend your builder to a friend?” In the 2016 survey results an somewhat unbelievable 85% said they would, but did they? Most of the large house builders have recommend a friend schemes also known as “send a friend.” Normally a leaflet outlining the scheme is dropped in the Welcome Pack buyers are given when they move in to their new home. They offer a cash payment to buyers who recommend a friend or someone who goes on to buy a home from the house builder. These payments vary considerably from a paltry £300 (Keepmoat) up to £4,000, although it appears £500 is the most common.
For most, the extra money will come in handy at a time of need, especially with all the costs associated with moving home. But beware there is a procedure and significant hoops to jump through before you can get your referral cash, even then it can take several weeks. The referral payment is only made following the friend’s legal completion.
Firstly, you should also consider whether your house builder is worthy of recommendation. Would your friend thank you if their new home turned out to be an unmitigated disaster from hell as they often do?
“The PPI of the house building Industry”
The APPG for Leasehold and Commonhold Reform managed to secure a debate in the commons chamber on Tuesday 20th December 2016 to discuss the leasehold new houses scandal. With 53 APPG members, it was surprising that only 13 MPs and Housing Minister Gavin Barwell attended initially. I previously highlighted the scandal of leasehold new houses on 7 November 2016 entitled “The next mis-selling scandal” This phrase apparently being picked up, with the Labour MP for Ellesmere Port and Neston, Justin Madders calling the practice during the debate as “the PPI of the house building Industry”. See also Never buy a leasehold new house 28 October 2016
Leasehold new houses scandal
An analysis by the excellent campaign group Leasehold Knowledge Partnership (LKP) in November 2016, revealed that 8,775 new-build leasehold houses totalling nearly £2billion were sold in England and Wales last year. In all around 45,000 new houses have been registered as leasehold. Many of these bought with help from taxpayers’ through the Help to Buy scheme. In most cases, the housebuilder sells the freehold after a couple of years to a private company, which can then demand extortionate fees from homebuyers.
Hardly a person to let an opportunity slip to gripe about the perceived failings of the planning process and other woes of the house building industry, Redrow’s CEO Steve Morgan, is becoming a regular whinger whenever his company release results or issue interim statements to the City. His latest tirade this week concerned the release of greenbelt land for house building, capacity issues relating to labour and materials shortages and his perceived restrictive planning policies.
Reasons to be cheerful?
Morgan’s company Redrow released a record set of results and doubled the dividend paid to its shareholders on the back of a 91% increase in profits to £132.6 million for the year to the end of June. The average selling price of a Redrow home is also up 13% to £239,500 – the fifth highest of the large house builders. The number of new homes built was also 27% higher, up 727 to 3,597. All of this thanks to the government’s Help to Buy scheme, acknowledged by Redrow and facilitating over a third of their private sales (35%).
You would think this would make for a very happy bunny – especially when you consider that Morgan will be £3million richer as he owns 150 million shares in his company – but not apparently so.
On brick shortages:
According to Morgan, there are just not enough bricks being made to go round. Strange, as his competitors Barratt managed to build 13,663 new homes, nearly four times more than Redrow and Taylor Wimpey also managed to get bricks for the 11,600 new homes they built last year, again over three times the number Redrow built!
It takes around 10,000 bricks to build the average UK house. Around 1,560 million bricks were made last year – enough for 156,000 new houses. Nowhere near that number of houses will be built in 2014; in fact, it would be a surprise if a total of 156,000 new homes are built this year! So enough bricks are being made and Redrow’s competitors manage to order sufficient quantities so perhaps Morgan should be looking closer to home!
Despite housebuilder’s results last week reporting an average 16% increase in the number of homes they had built during 2013, house building output is actually 11.3% below pre financial crisis levels. The number of new homes started in 2013 was 122,590, the highest since 2007. But this is still HALF the number experts say are needed each year to meet housing demand, let alone addressing the shortages from previous years.
However, the number of new homes completed last year actually fell by 5% to 109,370. The Government’s schemes have not helped either, creating easier access to borrowed money resulting in boosted demand rather than increased supply, sending house prices soaring, especially in the south.
Home ownership has now fallen to its lowest level in 25 years. The number of people sleeping rough in England has increased by over 30% since 2010. The proportion of working households claiming housing benefit is now higher than 2010. Hardly a success story Mr Cameron! At the same time, the large plc housebuilder’s are returning cash piles generated from the record profit increases, to their shareholders.
This week five national plc house builder’s reported record profit rises as they cash in on the state sponsored Help to Buy feeding frenzy. According to recent figures from the DCLG , 89% of the Help to Buy loans have gone to first-time buyers since the scheme began in April 2013. With an apparently never ending stream of undiscerning, naive first timers flocking to builder’s sales offices, buying whatever is available, what incentive do house builders have to improve quality of the homes they build?
You also have to question why the government is currently advertising it’s Help to Buy scheme on national television, when the figures released by these major national builders during this week demonstrate that this advertising is totally unnecessary.
Greed is good and greed is back, as both builder CEOs and their shareholders receive payouts from the excessive profits generated from the government’s Help to Buy subsidy. New Home Blog saw this coming!
Builder’s report record profit increases – but not improving quality!
Here we go again: “Profitability, Cash generation, Completions, Average selling prices, Earnings per share, Land banking, Trading outlook” yada-yada! The only house builder to make any meaningful statement regarding a commitment to improving quality and customer service was Barratt, with reference to their consistent HBF “customer satisfaction” 5-Star rating and their record 102 NHBC quality awards in 2013.
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.”