So while the RICS tells us there’s a 10% chance of an eighties-style housing crash and construction of the Shard is put on hold...
Confused? You bet. Add to that the two-day run on Northern Rock, interest rate cuts in America and surging stock exchanges around the world and we have a picture of the next 12 months that looks like it was painted by Jackson Pollock.
What we do know at this stage seems to indicate that companies should proceed with caution rather than running for cover. True, the commercial property market has been hit by rising interest rates and the same credit squeeze that embarrassed Northern Rock. So far this has mainly affected the selling of property, but the development side isn’t immune, as we can see from the Shard. Although we’re not going to see big equity-funded developments in the City, such as the Heron Tower, shelved, debt-financed sheds at the end of the M62 now seem less viable. On the other hand, as Bovis’ statement makes clear, this is taking place against the background of a work glut, which John Dodds, Kier’s chief executive, says will last for three years. Remember too that infrastructure is getting big – even Crossrail looks set to get the go ahead. Canny firms are already planning ahead, setting up nuclear divisions for example, to capitalise on changing sources of work.
But now to the housing market. Interest rates rises have been doing their job and prices are expected to stay flat for the coming 12 months. But this is taking place against a background of pent-up demand, an increase in public sector funds, and now it seems a likely cut in interest rates, too. Interestingly,
that housing market seer Tony Pidgley snapped up £2m of shares in his own housebuilding company this week. A tale to calm the nerves, surely.
A good start, but a long way to go
This week’s health and safety summit was an altogether different affair to the table-thumping rally led by John Prescott in 2001. There were no targets and no veiled threats. Instead we had measures to transfer major contractors’ best practice to housing and refurbishment, where a more gung-ho attitude to life and limb prevails – a recent blitz by the Health and Safety Executive (HSE) revealed that one in three refurbishment sites put their workers at risk. And just this week two men were killed, one on a housing site, and another critically injured. While the authorities want the industry to sort itself out, the reality is that it’s more likely to do so under steady pressure from government. Peter Hain’s commitment is laudable, but he must see the job through – and provide the HSE with more resources. Success will also depend on a tougher, more hands-on approach from the HSE – coupled with larger fines.
Denise Chevin, editor