I am in the midst of looking at endless numbers on house building and house builders for the annual Housing Market Intelligence report. I'll admit things are a bit slippy at moment. Trying to put meaning to the numbers is a bit like trying to pin a donkey's tail on wobbling jelly when you're blindfolded. Not that I have tried.
As mentioned before, I am also reading bits and pieces from a book that has been on my shelf for many years called The Construction Company in and out of Recession. I sensed it would one day come into its own, never having faith in the mantra "an end to boom and bust".
The book does provide some extremely interesting snippets, so I thought I might mention a couple.
First a bit of background.
Before the recession of the early 1990s contractors were much more conglomerated than they are today, with many very active in house building and commercial property.
The primary cause of the recession was a sharp tightening of monetary policy - interest rates jumping from 7.5% to 15% - and a subsequent rapid drop in house prices and transactions that compounded the pain. Commercial property prices also fell sharply and building work plunged.
Matters were not helped by the sudden spurt in house prices created by the (in hindsight) monstrously foolish decision by the Chancellor Nigel Lawson to give people a few months notice that he was ending double income mortgage tax relive. He set the bandwagon rolling.
Here are a few quotes that caught my eye, remember the book was published in 1995:
"...the boom conditions seemed to create an unwillingness to face the fact that it would end."
"Had the companies which were planning in the boom conditions of the mid and late 1980s thought the unthinkable, for example, a collapse in the property and housing markets, they should have been able to avoid some of the disastrous consequences of the recession. Perhaps they should now be thinking about the consequences of future volatile interest rates and possibly higher inflation as well as about changes required during a recovery or even a further recession."
"Some companies postponed the painful process of writing down assets in the hope of an upturn. In general, however, those that wrote down their assets earlier were able to turn their attention to constructive policies of rebuilding balance sheets sooner and benefited as a result. Moreover those which anticipated a long recession earlier were better able to cope with the financial problems which followed."
"Housing firms had to write-down land bought from 1987 to 1989 by between 70% and 80%."
The book does point out that some firms at the time continued to buy land in a frenetic market with rapid inflation almost up to the point of the housing bubble bursting.
It is easy to look at these quotes and think how little heed has been taken of the past and previous experiences.
But, while it is still early days, I have noticed when looking at the numbers, the policy decisions and the thoughts expressed by the current crop of senior managers in construction and house building signs that many, if not most, are much better prepared than their predecessors.
Encouragingly this seems to fit with a view I have held for some time - that there has been a sea change in the quality of management entering the construction industry over the past decade or so.
This appears to bode well for the corporate structure of the industry.
Also encouraging was the view implied or expressed directly by the top directors quoted in this year's Contract Journal Construction Top 100, that there is no room for complacency.
For your reference: The Construction Company in and out of Recession, Hillebrandt, Cannon, Lansley, 1995, MacMillan Press ISBN 0-333-61771-1