Housebuilding 2024...

Predicting the landscape of housebuilding in 2024 involves peering into the proverbial crystal ball, with one noteworthy indicator being the share prices of publicly traded housebuilders (see 12m graph below). While the stock market typically operates 6-12 months ahead, reflecting investor and advisor sentiments about the future, it's crucial to acknowledge the speculative nature inherent in such projections.

A significant development is the marked reduction in inflation, with money markets anticipating a full percentage point drop to 4.25% by the year's end—a figure aligning with the average long-term interest rate. However, the challenge lies in the perception of this rate as high, influenced by the persistent impact of ultra-low rates since the 'great recession' of 2008/09.

Entrepreneurial developers are adopting a more optimistic stance, strategically acquiring new sites that will enter the market in a few years, anticipating heightened demand. In contrast, major publicly quoted housebuilders are compelled to pursue a risk-averse strategy, avoiding actions that could adversely impact their share prices.

Concerning infrastructure and delivery capability in housebuilding, limited office closures — primarily affecting PLCs with substantial overlap or under-performing/newly established offices — have not significantly disrupted operations. Redundancies, while unfortunate, have often resulted in individuals finding alternative roles within the sector. This resilience provides developers with the potential to gear up when confidence returns, fostering a return to business as usual.

However, challenges persist. The supply chain and subcontractor availability, though improving, remain constrained and more expensive. Development finance retains its high cost, and planning processes are described as chaotic—a sentiment echoed in recent Cognisant client surveys, citing planning as the foremost obstacle to housebuilding.

Forecasting is inherently challenging and often subject to deviation. Nevertheless, the outlook for 2024 appears cautiously optimistic, signaling a year of gradual improvement, albeit with potential hurdles - election anyone? Maintaining a positive perspective seems warranted in navigating the complexities of the evolving housebuilding landscape.

What are your thoughts on the prospects for 2024?