好色先生TV

Six months ago, housebuilders were like drowning men, able to see nothing but the next wave breaking over their heads. Executives inflated their life jackets and entered survival mode. Very few had the time or the stomach to wonder what the industry would be like when the crisis was over.

Then, as some of the big players refinanced this spring, a sense of relief spread through the show homes and the stock market.

But with this elation came the apprehensive enquiry:

鈥淲hat now?鈥�

The only thing that seems certain is that the housebuilders鈥� business model will not revert to life as it was lived before the run on Northern Rock in September 2007; that relied on firms borrowing vast sums to buy land, and each other. But some alternative futures are beginning to come dimly into view.

The contracting model

This week Sir Bob Kerslake took the opportunity to propose one such alternative. The chief executive of the Homes and Communities Agency (HCA) told the Chartered Institute of Housing in Harrogate that housebuilders should form closer relationships with registered social landlords, and that more contractors should enter the housebuilding fray.

This is part of an HCA plan to boost production by working with as many delivery partners as possible. The hope is that, in exchange for land, they will be willing to share the sales risk and build in spite of the weakness of the market.

Kevin Cammack, an analyst at Cenkos Securities, says housebuilders cannot afford to ignore Kerslake鈥檚 overtures, despite the lower margin his model brings. He says: 鈥淭hey need to respond to the HCA and the quasi-contracting model it is proposing. Social housing isn鈥檛 the grief it once was and there are a lot of schemes out there that wouldn鈥檛 have even gone ahead without it.鈥�

With margins of about 6%, rather than the 20% reached at the height of the boom, the HCA model has its limits. Alistair Leitch, finance director at Bellway, says: 鈥淲e certainly haven鈥檛 sat down and thought about morphing into a contractor.鈥�

He adds that housebuilders have to accept that they are in a cyclical industry. 鈥淭here are a multitude of ways to reduce risk and cut costs, but you should be doing those during the boom times, too. We know booms won鈥檛 last forever and that鈥檚 why we got out of city-centre apartments in 2003 and 2004.鈥�

The need for speed

We certainly haven鈥檛 sat down and thought about morphing into a contractor

Alistair Leitch, Bellway

Robin Hardy, an analyst at KBC Peel Hunt, is pessimistic about the prospects for recovery. He says housebuilders may need to make more radical changes. 鈥淛ust because a model is tried and tested doesn鈥檛 mean it鈥檚 safe. That was the argument used by the US automotive industry.鈥�

He believes the housebuilding industry will need to more fully embrace technology such as off-site manufacturing to speed up build time. 鈥淯nless there鈥檚 a sharp rebound, the current model is not sustainable. Most housebuilders are not profitable and construction costs will only get higher as building regulations get tighter.鈥�

A quicker build time, Hardy argues, could move the focus away from margins: 鈥淚f you have 拢100m and churn it twice a year at a 10% margin, you make as much profit as turning it once at 20%.鈥�

He also predicts that landbanks will decrease as builders become reluctant to tie up so much cash. The result, says Leslie Kent, an analyst with FinnCap, will be a 鈥減ile 鈥檈m high, sell 鈥檈m quick鈥� way of doing business.

Hardy adds: 鈥淭here鈥檚 no reason why you shouldn鈥檛 see Tesco or Virgin becoming housebuilders.鈥�

The search for investment

Efficient use of capital will certainly be vital in a climate where banks are reluctant to part with their cash. Stephen Stone, chief executive of Crest Nicholson, says the slow churn of cash will be a particular problem for brownfield regeneration, where remediation work can mean it is three years before housebuilders see a return.

He is encouraged by positive noises made by the HCA about brownfield development and the 鈥渇orward cash cushion鈥� its involvement would bring, but believes housebuilders will also need to attract private investors.

He says: 鈥淭he big unknown is whether we can get pension funds into residential. We鈥檝e never had to in the past, but there is a need now and they can take a 40-60-year view on their investment.鈥�

Richard Kelly, construction partner at accountant BDO Stoy Hayward, points to the German model as a possible way of avoiding the feast/famine pattern. He says: 鈥淲ith a long-term investor on board who is not just looking to make a quick buck, companies can play the cycle more easily.鈥�

Although housebuilders feel there are slim pickings out there, in recent weeks there have been signs investors are getting ready to swoop. This week a company called Landbank became the latest to join the fray, with a plan to raise up to 拢250m to spend on distressed land assets.

John Messenger, an analyst at RBS, says such funds are less likely to be tempted by a future dominated by low-density, low return future. As the demand for flats dries up, many housebuilders have publicly stated they are planning to build more traditional housing.

The big unknown is whether we can get pension funds into residential development

Stephen Stone, Crest Nicholson

So, will the industry learn from the mistakes it made while over-borrowing during the boom? Kelly believes some may, whereas others will still have the appetite for risk. He says: 鈥淵ou can鈥檛 take risk out of the equation. If you believe there is a good opportunity to buy land, develop it and make 拢1m, it鈥檚 obvious what you鈥檙e going to do, isn鈥檛 it?鈥�

The voice of experience

Tony Pidgley, Berkeley Group chief executive

Tony Pidgley, the Berkeley Group chief executive, is going through his third recession. He is renowned for correctly predicting the 1990 crash, and in March he called the bottom of the current downturn. He runs the only volume housebuilder with cash in the bank.

The model

My view on what the industry should learn hasn鈥檛 changed; housebuilding is not a scalable model. It needs a phenomenal skills base to buy the land, deal with the complexity of the planning system and manage all the costs in the middle 鈥� you can鈥檛 write a computer program to do that.

The HCA

Partnership is good but you need the right chemistry and culture. It also won鈥檛 necessarily make a contractor a decent housebuilder. Us housebuilders have come a long way and know what we鈥檙e doing by now.

Outside investment

I don鈥檛 believe that because you have a lot of money you can make money from distressed land. You鈥檙e not seeing the banks selling land cheaply like you did during the last recession. We are looking to buy ourselves, but we won鈥檛 pay idiot prices.

Technology

There鈥檚 always room to improve but technology in housebuilding has moved on apace in recent years. There is only so much you can do and buyers still like solid bricks and mortar.