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AM45253

AMA HOUSEBUILDING MARKET - July 2003

Overview

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This report covers: housebuilding, market, higher specification levels, future trends, private sector, Local Authority, Housing Associations, regional development offices, market size, market value, market report, marketing, brand shares, market research, market research, market value, companies, market leaders, competition, customers, retailing, analysis, city, manufacturing, commerce, industry, blue-chip, corporation, leading companies, business intelligence, critical success factors, charlie, analysis, industry sectors, industry size, sales, turnover, market share, critical success factors, current issues, company profiles, sector size, demand, trends, manufacturing output, distribution, market segmentation, forecasts, overview, factors, structure, strategy, sector, brands, branding, policy, trade associations, overseas trade, employment, marketplace, legislation, financial results, advertising, promotion, branding, brands, sales, turnover, exhibitions, strengths, weaknesses, opportunities, threats, political, social, economic, technical, buyer behaviour, consumer penetration, product development, market growth, future trends, sources, information, penetration, expenditure, acquisitions, mergers, profiles, takeovers, buyouts, facts, figures, statistics, strategic, expansion

Companies covered include: Persimmon, George Wimpey, Barratt Developments, Beazer, Bryant, Taylor Woodrow, Wilson Connolly, Wainhomes, Alfred McAlpine Homes, Redrow, Galliford Try, Gerald Wood Homes, Knapp Group, Kier, Allison Homes, Bellway, Wilson Bowden, Westbury, Bovis Homes, Berkeley, Countryside Properties, Miller, J S Bloor, McCarthy & Stone, Crest Nicholson, Fairclough, John Laing, Prowting, Fairview, Ideal Homes, Tilbury Douglas, Torwood, Homes, John Mowlem Homes, Charles Church, Tarmac, Greenham, Trading, Greenham Construction, Prestoplan Purpose Built Ltd, Clarke Homes, John Maunders, Prowting plc, Costain Homes, P&O Group, Britannia Homes, Manor, Kingdom Developments, Thirlstone Group Ltd, Miller, Group Ltd, Cussins Property, Lynch Homes, Crest Nicholson plc, Fairclough Homes Ltd, AMEC plc, Centex Development Company UK Ltd, Centex, Corporation USA, General London Constructors Ltd, Hillsdown Holdings, Fairview HoldingsProwting, plc, Westbury plc, Octagon Developments Ltd, Beechcroft plc, Domus, Prowting, John Laing, Ben Bailey plc, A & J Stephen (Holdings) Ltd, Bett Brothers plc, Bewley Homes, Bowey Homes Ltd, Cala Group Ltd, Chartdale Ltd, Croudace Ltd, David McLean Homes Ltd, David Payne Homes Ltd, Elite Homes Group, Furlong, Homes Ltd, Galliford Try plc, Stamford Homes, Midas Homes, Knapp Group, Gerald Wood Homes, Goldcrest Homes plc, Haslam Homes Ltd, Henry Boot Homes, Hopkins Homes Ltd, Kendrick Homes Ltd, Kier Group plc, Swallow Homes Ltd, Linden Group, Linden Holding, MacTaggart & Mickel, M J Gleeson Group plc, Morgan Sindall plc, Lovell Partnership, Wheatley Construction, Morris Group Ltd, Allen plc, AWG plc, Norfolk Homes, Dacerell Ltd, Pelham Homes Ltd, Arrow, Property Investments Ltd, Rialto Homes plc, Robert Hitchins Ltd, Bay Holdings Ltd, Scotia Homes, Sheperd Homes Ltd, Swan Hill Homes, Spread Trustee Company Ltd, Wates Homes Ltd, Wates Group, Weaver Homes Ltd, Yuill Group Ltd, Gladedale.

Table of Contents
Executive Summary
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TABLE OF CONTENTS

1	INTRODUCTION	7
2	SUMMARY	8
3	KEY MARKET INFLUENCES	12
3.1	GENERAL	12
3.2	GDP GROWTH	12
3.3	INFLATION & INTEREST RATES	13
3.4	UNEMPLOYMENT	14
3.5	HOUSEHOLD CONSUMPTION	15
3.6	STERLING	16
3.7	POPULATION PROFILE	17
3.8	AVERAGE SIZE OF HOUSEHOLDS	19
3.9	CONCLUSION	20
4	CONSTRUCTION MARKET OVERVIEW	21
4.1	THE CONSTRUCTION MARKET	21
4.1.1	Value of Output - Construction New Work	21
4.1.2	Value of New Orders	25
4.2	HOUSEBUILDING MARKET -OVERVIEW	27
4.2.1	Overall Market Performance	27
4.2.2	Current Market Characteristics	30
5	THE NEW HOUSING MARKET	32
5.1	DEFINITION	32
5.2	HOUSING STARTS	32
5.2.1	Overall Figures	32
5.2.2	White Paper on Future Urban Regeneration	35
5.2.3	Regional Housebuilding Starts	36
5.3	HOUSING COMPLETIONS	39
5.3.1	Overall Figures	39
5.3.2	Private Sector	42
5.3.3	Public Sector	42
5.3.4	Registered Social Landlords (RSL's)	43
5.4	VALUE OF HOUSEBUILDING	44
5.5	HOUSE PRICES	45
5.5.1	Average Price of New Dwellings	45
5.5.2	Average Prices of All Dwellings	48
5.6	HOUSE-MOVING MARKET	50
5.6.1	Residential Property Transactions	50
5.6.2	Mortgages	51
5.7	HOUSING STOCK	52
5.7.1	Overall Housing Stock	52
5.7.2	Housing Land Prices	55
5.7.3	Household Tenure	58
5.7.4	Dwelling Stock By Age	60
6	THE HOUSEBUILDERS	62
6.1	DEFINITIONS	62
6.1.1	National Housebuilders	62
6.1.2	Larger Regional Housebuilders	62
6.1.3	Smaller Regional And Local Housebuilders	63
6.2	OVERALL MARKET	63
6.3	HOUSEBUILDERS MARKET SHARE	65
6.4	NATIONAL HOUSEBUILDERS COMPANY PROFILES	70
6.4.1	Key Company Indicators	70
6.4.2	Five Year Performance Record	92
6.4.3	Corporate Activity	95
6.5	REGIONAL & LOCAL HOUSEBUILDERS	97
6.5.1	Companies	97
6.5.2	Recent Corporate Activity	105
7	PREFABRICATED & FACTORY FINISHED PRODUCTS	106
7.1	TYPES OF PREFABRICATED BUILDING CONSTRUCTION	106
7.2	BACKGROUND	107
7.3	PRODUCT RANGE	108
7.3.1	Timber Frames	109
7.3.2	Panel Construction	110
7.3.3	Prefabricated Foundations, Roofs, and Floors	111
7.3.4	Bathroom Pods	112
7.4	CURRENT USAGE	113
7.5	FUTURE PROSPECTS	114
8	HOUSEBUILDERS BUYING AND SPECIFICATION	115
8.1	OVERVIEW OF BUYING AND SPECIFICATION	115
8.1.1	Product Specification Issues	117
8.1.2	Role of the Sub-Contractor/Installer	118
8.2	SOURCE OF PURCHASE	119
8.2.1	Direct Supply from Manufacturer	119
8.2.2	Builders and Plumbers Merchants	120
8.2.3	Other Sources of Supply	121
9	FUTURE PROSPECTS	122
APPENDIX 1	HOUSEBUILDING PERFORMANCE INDICATORS 1996-2000 - COMPANIES ACQUIRED IN 2000/2	125
APPENDIX 2	HOUSEBUILDING BRANDS ACQUISITIONS	132
APPENDIX 3	OLD ACCOUNTS BEFORE FIGURES WERE RESTATED	135

TABLES & CHARTS
CHART 1	HOUSEBUILDING COMPLETIONS 1981-2002	8
CHART 2	INTEREST RATES AND INFLATION (RPI) FROM 1990-2005	14
CHART 3	PDI & SAVINGS RATIO 1980-2005	16
TABLE 4	EXCHANGE RATE FLUCTUATIONS 1997-2003 - DOLLARS, AND THE EURO TO THE POUND STERLING, SPOT RATES	17
CHART 5	AGE DISTRIBUTION OF THE RESIDENT UK POPULATION 2001 ('000)	18
TABLE 6	AVERAGE HOUSEHOLD SIZE FOR GREAT BRITAIN 1971-2001	19
CHART 7	VALUE OF CONSTRUCTION OUTPUT NEW WORK 1992-2002 (£ BILLION)	21
TABLE 8	CONSTRUCTION NEW WORK OUTPUT BY SECTOR 1992-2002 (£ BILLION) AT CURRENT PRICES	22
TABLE 9	NEW ORDERS OBTAINED BY CONTRACTORS 1990-2002 - CURRENT PRICES (£ MILLION)	26
TABLE 10	PERFORMANCE OF THE NEW HOUSEBUILDING MARKET 1994 TO 2002	28
TABLE 11	HOUSING STARTS 1994-2006 IN GREAT BRITAIN BY SECTOR ('000)	33
TABLE 12	HOUSEBUILDING STARTS FOR THE PRIVATE SECTOR - ENGLAND BY REGION 1996-2002 BY VOLUME (000'S)	36
TABLE 13	HOUSEBUILDING STARTS FOR THE PRIVATE SECTOR - ENGLAND BY REGION 1996-2002 percent INCREASE/DECREASE	37
TABLE 14	HOUSEBUILDING STARTS FOR THE PUBLIC SECTOR - ENGLAND BY REGION 1996-2002 BY VOLUME (000'S)	38
TABLE 15	HOUSEBUILDING COMPLETIONS (000'S DWELLINGS) 1994-2006 IN GREAT BRITAIN	39
CHART 16	MIX OF NEW HOUSING COMPLETIONS IN GREAT BRITAIN BY SECTOR 1980-2002 ( percent)	41
TABLE 17	UK VALUE OF HOUSEBUILDING CONTRACTORS OUTPUT AT CURRENT PRICES (£ MILLION) 1992-2002	44
TABLE 18	AVERAGE PRICE OF NEW DWELLINGS 1992 TO 2002 (£'000'S)	46
FIGURE 19	PRICE INDEX - ALL HOUSING V NEW HOUSING (1992 PRICES)	49
TABLE 20	NUMBER OF PROPERTY TRANSACTIONS IN ENGLAND AND WALES 1996-2002	50
TABLE 21	AVERAGE ADVANCES BY ALL MORTGAGE LENDERS ON NEW DWELLINGS 1996-2002	52
TABLE 22	STOCK OF DWELLINGS IN GREAT BRITAIN 1971-2002	53
TABLE 23	STOCK OF DWELLING BY REGION IN ENGLAND 2002	54
TABLE 24	AVERAGE PRICE OF PRIVATE SECTOR HOUSING LAND IN ENGLAND AND WALES 1990 TO 2001	55
TABLE 25	HOUSEHOLD TENURE DISTRIBUTION IN GREAT BRITAIN 1991 TO 2002	59
CHART 26	MIX OF STOCK OF DWELLINGS BY AGE 2002 - ENGLAND	60
TABLE 27	NHBC REGISTERED BUILDERS BY NUMBER OF UNITS STARTED 1990-2002	64
TABLE 28	MARKET SHARE OF THE LEADING HOUSEBUILDERS BY VOLUME 2002	66
TABLE 29	MARKET SHARE OF MAJOR HOUSEBUILDERS 1993 TO 2002	68
TABLE 30	KEY INDICATORS UK HOUSEBUILDING - PERSIMMON PLC	70
TABLE 31	KEY INDICATORS FOR UK HOUSEBUILDING - GEORGE WIMPEY PLC	71
TABLE 32	KEY INDICATORS UK HOUSEBUILDING - BARRATT DEVELOPMENT PLC	73
TABLE 33	KEY FIGURES UK HOUSEBUILDING - TAYLOR WOODROW/BRYANT	74
TABLE 34	KEY INDICATORS UK HOUSEBUILDING - BELLWAY PLC	75
TABLE 35	KEY INDICATORS UK HOUSEBUILDING - WILSON CONNOLLY GROUP	76
TABLE 36	KEY INDICATORS UK HOUSEBUILDING - WILSON BOWDEN PLC	77
TABLE 37	KEY INDICATORS UK HOUSEBUILDING - WESTBURY PLC	79
TABLE 38	KEY INDICATORS UK HOUSEBUILDING - REDROW GROUP	80
TABLE 39	KEY INDICATORS UK HOUSEBUILDING - BOVIS HOMES GROUP PLC	81
TABLE 40	KEY INDICTORS UK HOUSEBUILDING - BERKELEY GROUP PLC	83
TABLE 41	KEY INDICATORS UK HOUSEBUILDING - COUNTRYSIDE PROPERTIES PLC	84
TABLE 42	KEY INDICATORS UK HOUSEBUILDING - MILLER HOMES	86
TABLE 43	DIVISIONAL PERFORMANCE OF JS BLOOR	87
TABLE 44	KEY INDICATORS UK HOUSEBUILDING - MCCARTHY & STONE PLC	88
TABLE 45	KEY INDICATORS UK HOUSEBUILDING - CREST NICHOLSON PLC	89
TABLE 46	KEY INDICATORS UK HOUSEBUILDING - FAIRVIEW NEW HOMES	91
TABLE 47	KEY INDICATORS UK HOUSEBUILDING - LINDEN HOMES	92
TABLE 48	KEY INDICATORS UK HOUSEBUILDING INDUSTRY COMPARISONS 5 YEAR ANALYSIS*	93
TABLE 49	KEY INDICATORS UK HOUSEBUILDING - BEAZER GROUP PLC	125
TABLE 50	KEY INDICATORS UK HOUSEBUILDING - ALFRED MCALPINE HOMES	126
TABLE 51	KEY INDICATORS UK HOUSEBUILDING - BRYANT HOMES DIVISION	127
TABLE 52	KEY INDICATORS UK HOUSEBUILDING - WAINHOMES LTD	128
TABLE 53	KEY INDICATORS UK HOUSEBUILDING - PROWTING PLC	129
TABLE 54	KEY INDICATORS UK HOUSEBUILDING - JOHN LAING LTD	130
TABLE 55	KEY INDICATORS UK HOUSEBUILDING - TAY HOMES PLC	131
TABLE 56	KEY INDICTORS UK HOUSEBUILDING - BERKELEY GROUP PLC	135

INTRODUCTION

AMA Research have published the latest Edition of the "Housebuilders Market - UK 2003". Consolidation activity amongst leading housebuilders has renewed interest in the housebuilding market, and this report focuses on the characteristics, recent developments and leading suppliers to the sector. The report concentrates on the key organisations within the housebuilding market and provides a comprehensive review of the major aspects of the new housebuilding sector.

Key areas in the report: -

Review of Housebuilders - analysis of major housebuilders, volumes, market shares, positioning, key housebuilding indicators since 1997, recent corporate activity, forecasts of future trends.

Detailed assessment of the housebuilding market - housing starts & completions, analysis by sector (private/public), forecasts of future trends.

Assessment of overall construction market - analysis of performance over time, recent trends, forecasts of future developments.

Prefabricated Building Products - overview of product ranges, current usage, recent developments, forecasts of future trends.

Review of Buying & Specification Process - overview of factors influencing decision makers in the specification and buying processes, use of purchase agreements for certain types of building products, supply and fit agreements, etc.

Also Available…Fully Updated for 2003:-

Database of the Top UK Housebuilders - includes over 600 Head and Regional offices

Includes full mailing address & telephone number.

Multi-use, no restrictions on usage, available in MS Excel format.

Areas of particular interest:-

Increasing consolidation of the housebuilding market with larger organisations continuing to account for a larger percentage of the market.

Increased corporate activity in recent years as mergers and takeovers have been instigated to improve market share and presence, and boost operating profits and margins.

Changing nature of housebuilding market to more sustainable future development.

Increasing influence of urban redevelopment and use of "brownfield" sites.· Decline in completions numbers.

The overall housing market has continued to evolve throughout the 1990's with substantial changes to the mix between public and private sectors, the size and style of dwellings and specifications levels.

Key areas covered in the report include:

HOUSEBUILDERS

Overall market size, number of builders, analysis of key changes since 1996.

Analysis of market shares of leading housebuilders, comparisons of changing share since 1993.

Major review of leading national housebuilders - analysis of key indicators for UK housebuilding (completions, turnover, pre-tax profits and average selling price) since 1997, current market position.

Rationalisation of industry structure, recent acquisitions mergers, etc.

Detailed review of the leading regional and local housebuilders, recent corporate activity. Analysis covering turnover, pre-tax profit, units completed and average selling price.

HOUSEBUILDING MARKET

Current market conditions - forecasts of steady and sustainable growth.

Analysis by sector - Private, Local Authority, Housing Associations, changing market mix, factors influencing the market, future trends, value of housebuilding output by sector.

New housing starts and completions -trends since 1994, review of market volatility in recent years, forecasts up to 2006, analysis of housing starts for public and private sectors by region.

Market structure - stock of buildings in UK, ownership structure, average household number, housing stock by age of dwelling, average price of new dwellings, residential property transactions, price of land for new house building.

PRE-FABRICATED BUILDING PRODUCTS

Overview of factors influencing use of pre-fabricated building materials.

Product review - timber frames, "I" beams, bathroom pods, pre-fabricated roofing systems, etc.

Assessment of current usage levels, forecasts of future trends.

BUYING & SPECIFICATION PROCESSES

Overview of key factors influencing the specification of building products.

Increasing adoption of national and regional purchase agreements and use of preferred suppliers, influence of sub-contract installation process.

Explorations of main source of supply - Direct Supply from manufacturer, Builders Merchants, Joinery Specialists, Own Manufacture etc. Influence of changing material usage on supply sources.

CONSTRUCTION SECTOR

Construction Output at overall levels and the impact on housebuilding.

Construction output per sector and the trends.

The report has over 130 pages and 50 tables and charts and provides a comprehensive review of the housebuilders market, analysing both industry and product developments within the new housebuilding sector.

EXECUTIVE SUMMARY

The housebuilders market is a substantial end-user of a large number of building products including bricks, blocks, kitchens and bathroom products. The housebuilding market within the UK has encountered a volatile history with peaks and troughs in the sector tending to mirror the general economic climate. In recent years the housebuilding market has seen a period of steadier growth and a move away from its cyclical nature. There has also been a shift in focus from the housebuilders who are concentrating more on sustaining margins and quality of new homes rather than on simply increasing completion numbers.

The changing levels of consumer confidence and fluctuations in interest rates and inflation have motivated the volatile nature of the new housebuilding sector.

The economic downturn of 1998 led to a decrease in the number of housing starts for that year, in turn affecting the completion levels for 1999 with the public and registered social landlords (RSL's) sectors also affected, with a marked decline in the volume of housebuilding activity undertaken. In 2001 completion levels reached their lowest since the 1920's with onerous planning approval procedures being cited by many of the leading housebuilders as one reason. A larger number of mergers and acquisitions amongst many of the leading housebuilders also led to focus being switched to internal restructuring strategies rather than on increasing completions numbers.

Although there has been a recovery in housing start levels, growth has only been around 5 percent since 2000 and housing completion levels are only expected to increase by around 3 percent per annum to reach 190,000 by 2006. Completion levels are also likely to impacted by the fairly limiting planning approval procedures, increasing housing land prices and government proposals to construct 60 percent of new build housing on brownfield land.

In recent years the use of brownfield land has increased for new housing developments and government emphasis on inner city and urban regeneration has indicated that previously used land will have greater significance for new housebuilding in the future. Some of the leading housebuilders now have specialist inner city development divisions that are capable of providing both social and private sector dwellings on inner city sites. Additionally many of the leading housebuilders also have land-finding divisions, as suitable land for the construction new housing becomes harder to find.

The number of registered housebuilders during 2002 stood at around 15,300 although only around 5,400 were involved in the construction of one or more new homes, with the remainder concentrating on RMI work.

In recent years the majority of housebuilders have increased their market share and national coverage, through a series of acquisitions and mergers, which has been aided by the re-positioning of some of the larger construction companies away from housebuilding. During 2002 the leading housebuilding companies accounted for just under 50 percent of the market. The leading national housebuilders in terms of completions were George Wimpey, Persimmon and Barratt Developments who together accounted for 22 percent of the market.

The leading housebuilders have experienced consistent gains in market share, turnover and completion levels over the last 5 years. This has been achieved through mergers and acquisitions and expansion programmes implemented by the leading housebuilders. Many of the leading housebuilders have reported turnover and profit increases in excess of 100 percent over the last 5 years. In addition, 2002 was a record year in terms of profit and turnover for many of the leading housebuilders. Significant price increases across the housing industry as a whole have also influenced this development.

A significant amount of merger and acquisition activity by the leading housebuilders took place in 2001, including Persimmons acquisition of Beazer and George Wimpey's acquisition of Alfred McAlpine Homes. 2002 corporate activity was not as strong although there was still some activity seen between the leading housebuilders including George Wimpey's acquisition of Laing Homes, Persimmon's acquisition of Merewood Homes, Wilson Bowden's acquisition of Henry Boot Homes and Westbury's acquisition of Henry Boot Homes. The result of the series of acquisitions and mergers witnessed in the market is that the top five leading housebuilders now account for around 29 percent of the market in terms of completions.

There has also been a degree of activity within the larger regional housebuilding sector including Gladedale's acquisition of Bett Brothers plc and Countryside and Metropolitan's acquisition of NorthCountry Homes.

There has been increased used of prefabricated building products/materials in recent years with the slowing down of the planning approvals process, significant skill shortages in the industry, a change of focus from government policy and changes in the building regulations contributing toward the products rise. Products such as bathroom and kitchen pods are finding increased use in developments such as apartments and health constructions whilst others such as factory made insulation boards have increased use due to changes in the thermal and acoustic building regulations.

Direct supply agreements for products such as bricks are important to the new housebuilding sector although builders merchants remain a significant and important supply channel for the housebuilders market. Sub-contractor installers are also used although they may have to specify from a preferred suppliers list, whilst there has also been an increase in the use of "supply fit" contracts.

Stringent legislative and industry standards including recent changes to the building regulations have lead to the evolution of preferred supplier lists in recent years. Increased technical specification has led to some of the leading housebuilders incorporating a technical department at head office.

The short to medium term future of the housebuilding industry looks relatively optimistic with growth forecasts for the next 3 years being fuelled by the current low level of interest rates making it easier for consumers to borrow money. However, there does appear to be an end to the boom that has characterised the market over the couple of years with house price rises slowing and a drop in the number of first time buyers are entering the market. Acquisition and merger activity between the major housebuilders has also slowed which may lead to an increase in the completion levels as restructuring programmes come to an end. In the long term future there is expected to be a major rise in the level of completions with forecasts estimating that an additional 4 million homes are needed by the year 2021 to avoid a housing shortage. In addition the Government has announced plans to build 200,000 affordable houses in sites across the South East.

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Last updated by Amanda Porteous December 2003