Safe as houses?

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The housing market has been one of the biggest victims of the credit crunch. A succession of scenarios where lenders have refused to lend, so builders haven’t been able to build and buyers haven’t been able to buy has meant that the only thing being built is a metaphorical wall that is keeping many out of the market. In the last few weeks, however, a few bricks have been knocked off the top by some well-aimed government and industry action.

Just last week, the UK Government promised to help build up to 16,000 new homes as part of a £400 million drive to stimulate the economy and help first-time buyers. It is a move that will let developers bid for funding, and allow them to build new housing from next July. Further to that, an extra £50 million has been set aside to refurbish empty homes and the Government will also underwrite 100,000 mortgages for new-build homes.

The opportunity is one that certainly won’t be shunned by the construction companies even though it may fall short of the massive investment push needed to get Britain building. You know the saying: every little helps. It certainly helped share prices as on the back of the announcement shares in Persimmon, Britain’s biggest house builder, went up three per cent, with Barratt Developments rising four per cent, Taylor Wimpey four per cent, Bellway three per cent and Berkeley one per cent.

Meanwhile in Scotland, the second wave of housing plans to be launched under the National Housing Trust initiative has now seen councils inviting bids from house builders and developers to build affordable homes worth £300 million. The scheme allows developers and local authorities to jointly fund home building projects with local authority loans underwritten by the Scottish Government.

These announcements on their own aren’t going to power a Popeye-like resurgence in the industry, but it is pleasing that some muscles are starting to flex in the public sector. Perhaps more importantly, there are sounds of shovels hitting dirt coming from the private sector as well, with Swedish-founded contractor Skanska announcing plans to build 800 UK homes a year by 2015.

Skanska is said to have spotted an opportunity during the financial crisis to enter the house building market, having spent the past decade developing its construction business in the UK, and the company has done so with a plan that is set to make it one of the top twenty house builders in the country.

Following Skanska’s announcement, Mersea Homes and Countryside Properties announced plans to build more than 2200 homes and community facilities on countryside north of Colchester. Home Group has also announced plans to build 4000 homes in four years. Further to that, Procure Plus has unveiled a £136 million new homes programme in Manchester.

There is another saying that throwing enough money at a problem can make it disappear. The question is: who will throw the money? It has been a positive couple of weeks for housing, but is it a signal that it is the private sector that will step up and bring down the wall? Or will the public sector make a bigger push too?