Housebuilders creak into action as they run out of unsold stock

Most major housebuilders are now starting to open up new sites, as prices stabilise and the builders run through their unsold units, according to research conducted by Building.

Last week’s interim statement by Bellway Homes, which indicated that it was responding to steadying demand by starting to open up sites again, was just the latest piece of evidence. When Building tried to contact more than 10 of the largest housebuilders, most said they were beginning to step up production.

This evidence is backed up by figures from the National Housebuilding Council, which show the first quarter-on-quarter rise in applications to start new homes in almost two years in quarter one this year. They rose 10% – although they are still down 53% on the same period last year.

Persimmon, Crest Nicholson, Miller, McCarthy & Stone and Taylor Wimpey said they were planning to increase their development programmes.

Peter Redfern, chief executive of Taylor Wimpey, said: “We cut production last year relatively early to keep it in line with what we were selling and as sales increased we have increased it.”

Redfern said the firm has been opening small sites for several months. However, because of the cut in starts last year, the number of completions this year will still be lower than in 2008. “It’s early to start big sites but we are starting to look at them.”

Mike Farley, Persimmon’s chief executive, said he was hoping to open 30 sites in the near future. McCarthy & Stone, which is building on eight sites, compared with the 60 it works on in normal times, plans to open four now and another four in the autumn. If demand justifies it, it will open a further four before Christmas.

One other large housebuilder, which did not want to be named, said it was aiming to increase its starts by 30% this year, largely because it does not have enough homes to meet demand. Another, smaller, builder said it was expecting to double the number of starts it made last year.

The only two firms that said they will not accelerate output are Berkeley and Countryside. Tony Pidgley, Berkeley’s chief executive, said his firm did not cut back production in the dramatic fashion that most of its rivals did and consequently does not need to ramp it up again.

McCarthy & Stone plans to open four sites now and another four in the autumn. If demand justifies it, it will open another four before Christmas

Barratt, Bovis Homes and Redrow all declined to comment, although in a statement to the City last month Redrow said it would start work on some sites. Only Bovis has said it would continue to reduce the 600 unsold homes on its books.

Unfortunately this increase does not necessarily herald the start of a revival in the housing market that subcontractors and product suppliers desperately need.

Brick makers, for example, still have a glut of unsold stock so a small increase in building may not be enough to make a difference to their activity. “There are enough excess bricks in the country to build a city the size of Nottingham,” said Noble Francis, economics director of the Construction Products Association (CPA).

The next test for the market is the autumn selling season. Several housebuilders said they have decided that they will increase production if sales pick up in September and October. But most believe it will be at least 2010 before the market gets significantly better – and some doubt whether building will ever return to its previous levels.

The CPA predicts that 70,000 homes will be started this year if the small increase in building continues. But that compares with 181,000 starts in 2007. In 2013, it is forecasting that housing starts will still be 17% lower than in 2007 even if there is a double-digit growth in starts every year from 2010.

An additional problem is that the housebuilding industry has made so many of its staff redundant over the past two years. Many balance sheets are also burdened by the effects of land writedowns. The result is that most firms could not increase production rapidly even if there were purchasers with cheque books at the ready.

Although small increases in housebuilding appear to be a sign that the sector is over the worst, the industry is far from being out of the woods yet.