Month: June 2020

Construction activity increased in May following a steep downturn in April, but the sector remains mired in a slowdown, new data reveals. 

Prime Minister Boris Johnson urged the construction industry to return to work last month as the government eased lockdown restrictions, but the sector remains in the worst downturn since 2009.

The findings from the UK Construction Total Activity Index, compiled by IHS Markit and the Chartered Institute of Procurement (CIPS), revealed May’s industry score was 28.9, up from 8.2 in April, but below the 50 mark which signals industry contraction. 

Construction companies that responded to the index survey reported a rapid drop in new orders received, which was largely attributable to the Covid-19 pandemic. Although respondents also stated that the reopening of construction sites had helped to limit the decline.

Tim Moore, economics director at IHS Markit, said: “A gradual restart of work on site helped to alleviate the downturn in total UK construction output during May, but the latest survey highlighted that ongoing business closures and disruptions across the supply chain held back the extent of recovery”.

Roughly 64% of those surveyed reported a drop in activity during May; only 21% reported an expansion. Those companies recording drops often cited furloughed staff and disruptions from social distancing measures on projects as reasons behind the drop. 

Moving Forward

When asked to elucidate on their prospects for 2020, optimism was little improved from April, indicating the construction sector is still battling for survival despite the gradual return to work.

“It seems likely that construction activity will rebound in the near-term, as adaptations to social distancing measures become more widespread and the staggered return to work takes effect. However, latest data pointed to another steep reduction in new orders received by UK construction companies, with the pace of decline exceeding the equivalent measures seen in the manufacturing and service sectors,” added Moore.

“Survey respondents often commented on the cancellation of new projects and cited concerns that clients would scale back spending through the second half of 2020, especially in areas most exposed to a prolonged economic downturn.

“Since the start of the lockdown period in March, business sentiment has remained more downbeat than at any time since October 2008.”

Self Build Suppliers Reopen

Self build suppliers have begun to reopen showrooms amid lockdown restrictions easing, and self builders now have growing access to homebuilding resources.

(MORE: Self Build: The Ultimate Beginner’s Guide)

Many companies have been offering virtual consultations during lockdown to help customers plan their projects from the comfort of their home, and while construction will continue to face challenging times, the homebuilding industry is at least edging towards something resembling normality as lockdown eases.

Self build mortgage completions have grown by 144% compared to the same period in 2019, new research shows. 

Saffron Building Society says the growing interest in its self build mortgages is from a mix of first-time buyers, those converting homes, and those working on large, multi-plot projects. 

The building society believes that with the housing market prone to fluctuations, which has been impacted by the coronavirus pandemic, self build’s popularity could rise further. 

Colin Field, CEO of Saffron Building Society, commented: “We are delighted to see that the interest in self build mortgages is on the increase. With the fluctuations in the market, it is a really feasible option for first-time buyers as a complete build will face too many financial changes – not just material cost.” 

The completions rise recorded between April-May this year was 144% higher than the same period last year. A spokesperson for Saffron Building Society said that it would expect an upturn at this time of year, but these figures indicate that increased self build activity could continue throughout the year.

A self build project can save between 10-20% on the price of a new home, according to the National Custom and Self Build Association (NaCSBA).

However, self build homes only equate to 8% of all new builds in the UK, despite the recent rise in popularity. In contrast, this is 60% in Germany. 

What is a Self Build Mortgage?

A self build mortgage differs from traditional mortgages, with funds released at key stages of the project, rather than a lump sum released upon sale of completion. 

There are additional variations, so knowing more about how self build mortgages work can make the process easier when you come to applying for one. 

Field added: “A self build might seem a little daunting, especially for a first-time buyer. But, the structure of the lending is so flexible, releasing funds at pre-set stages of the development to assist with cash flow, it is a very supportive way to get on the market. 

“It can be an exciting and rewarding path to your first home; or update, grow or improve your current home.”

Self build mortgages cover a range of projects too, from barn conversions to rebuilds – they are not just for those building from scratch.

Get an idea of how much you need to borrow by using our Build Cost Calculator. Remember to add on the cost of your plot and a healthy contingency fund to compensate for any issues you may encounter. 

UK house prices have fallen at the fastest rate since 2009 amid the coronavirus pandemic, Nationwide Building Society has revealed.

The monthly drop of 1.7% in May was the biggest since the financial crisis, meaning the average house price in the UK is now £218,902, compared to £222,915 in April. 

This momentous drop followed a 0.9% increase in April, when annual growth was recorded at 3.7%. Now, the annual growth rate is 1.8%, the slowest since December.

Experts have predicted that house prices could fall anywhere between 3% and 30% this year because of Covid-19, after lockdown brought the market to an abrupt halt.

Last month the government reopened the housing market as Covid-19 lockdown measures began to ease, and this led to housing demand reaching its highest level in nine weeks. 

But these new figures from the Nationwide house price index indicate the size of the challenges facing the housing market and the UK economy.

Ross Counsell, director at Good Move, commented on the findings: “These numbers are largely down to the reduction in market activity due to social distancing measures, and is a real tell-tale sign for the future of home buying.”

Could House Prices Bounce Back?

Robert Gardner, Nationwide’s chief economist, said that the economy is in the midst of a shock, and it could take time for this to pass and for house prices to recover.

“The raft of government policies adopted to support the economy, including to protect businesses and jobs, to support people’s incomes and keep borrowing costs down should set the stage for a rebound once the shock passes and help limit long-term damage to the economy.”

Counsell added that house prices could bounce back, but the housing market may need to adapt in order to respond to changing customer behaviour in the wake of the coronavirus pandemic. 

“The bounce back in the housing market is reliant on how the wider economy performs, however, the bigger challenge is how consumer behaviour has changed and how sellers need to adapt to continue to sell their properties. For example, they will begin to adjust their expectations on the price they will achieve and may be more inclined to accept a lower offer.

“We expect to see house prices bounce back fairly soon, but flats and other similar dwellings may take a much longer time to recover.”

Is Consumer Behaviour Changing?

Nationwide’s findings also showed that potential buyers are now planning to wait six months on average before entering the housing market, and that 12% had put off moving homes because of the lockdown. 

Moreover, housing preferences could be impacted. One in 12 households have invested in new home offices during lockdown, and buyers might be applying more importance on aspects such as outdoor space, which could impact how properties sell. 

Gardner said: “Behavioural changes and social distancing are likely to impact the flow of housing transactions for some time. Most viewed the current situation as a temporary pause in the market, with would-be buyers now planning to wait six months on average before looking to enter the market.

“22% of people said they had changed their mind as to what constituted the most important aspects of a home and are considering improving their home as a result of Covid-19.”

Sixteen industry leaders representing thousands of construction companies in the UK have teamed up to request the government delays the VAT reverse charge, which they say could financially ruin small and medium-sized (SME) home builders.

The VAT reverse charge is due to come into effect in October 2020, but has faced criticism for not being promoted enough by the government, and for its prospective impact on tradespeople. 

The Federation of Master Builders (FMB), Building Merchants Federation and Construction Leadership Council are among the companies which have signed a letter to chancellor Rishi Sunak. 

Construction leaders have warned that following the coronavirus pandemic, which has already hit the economy hard, many construction firms and SME builders lack the financial resources and staff (particularly for companies with furloughed workers) to be able to adhere to administrative requirements of the upcoming VAT changes. 

The BMF is joining forces with 15 leading #UKconstruction organisations to call for a delay to #reversechargeVAT.

Businesses, especially SMEs, already struggling with cashflow due to #COVID19 will be hit hard if this policy goes ahead in October @RishiSunak @HMTreasury pic.twitter.com/sxfxDMjlvO

— BMF (@bmf_merchants) May 31, 2020

Around 4,000 construction projects have reportedly been delayed or cancelled due to Covid-19, and construction companies are not in a position to be ready for the impending changes, the letter states. 

The FMB, which represents 7,500 SME builders in the UK, says that with many required staff currently on furlough, the pressure on cash-strapped firms could become too overwhelming.

(MORE: Government Under Pressure to Cut VAT on Retrofits)

What is the VAT Reverse Charge?

The VAT reverse charge will mean that VAT charges on certain construction services will need to be paid directly to HMRC. Renovators and extenders currently pay these charges to the supplier. 

Until now, the subcontractor has accounted for this VAT, and deducted VAT on supply as an input. This means that no net tax is payable to HMRC. 

But the construction industry has faced issues with fraud, whereby certain businesses charge VAT for the services they supply, then fail to pay the bill. HMRC has introduced the reverse charge to clamp down on this kind of fraud. 

The reverse charge means that it is the customer’s responsibility to account for VAT, so there is no opportunity for the supplier to disappear without paying the VAT to HMRC.

It is due to come into effect in October 2020, having previously been delayed by a year last September, when industry leaders warned that the introduction of the charge could clash with Brexit, and that the new measures would likely squeeze cash flow for SME businesses no longer receiving VAT payments.

The industry chiefs’ letter says delaying VAT reverse charges would help support the wider economic recovery, and have asked for the changes to again be pushed back by at least one year. 

Graven Hill, the UK’s largest self and custom build development, is launching a new webinar series to help people get a head start on their building projects.

The homebuilding industry has been criticised previously for failing to consider community growth in its design of homes and infrastructure, and self build schemes such as Graven Hill are striving to address this void through the creation of self build communities.

Graven Hill features a vibrant mix of custom build and new homes which are priced to suit a range of budgets. 

The free fortnightly webinars will launch on Tuesday 2 June, and will be led by industry experts sharing insights into Graven Hill’s self build and custom build homes.

Karen Curtin, managing director of Graven Hill, said: “While people can’t come to visit us, we want to bring Graven Hill to them. Our priority is helping people to realise that their dream home and lifestyle is more achievable than they may think, and we hope our special series of events will support house-hunters in their search for their grand design.”

Throughout the series, viewers will gain access to the full Graven Hill experience, from the different build options available and advice on how to finance a dream home. All sessions will also include allocated time for a Q&A with the experts.

The first three webinars are available to book now – visit the Graven Hill website for more information and to secure a place. 

Does Your Home Work for you?

We’ve all had to accept spending more time at home in recent months, as well as in the months ahead, and having a home that works for you has never been so important. 

“There is a general feeling across the housebuilding community that the Covid-19 crisis has altered the role of the home,” added Curtin. “With working from home now becoming ‘the new normal’, a house is far more than bricks and mortar; it is a central part of people’s lives.

“The recent change of pace has given many homeowners the time to consider whether their space still works for them; after all, our homes now have to play multiple roles as an office, a school and hopefully a place to relax at the end of the day.”

Through self building or custom building a home, you can create a dream home that fits your requirements, such as needing more space to accommodate a growing family.

Moreover, with lockdown measures now easing, showrooms, builders’ merchants and DIY stores beginning to reopen, and self builders and renovators are better equipped to access resources needed for their projects since the Covid-19 pandemic began.