The housing market seems to have hit the bottom and bounced, and according to our salary survey, the pay of housebuilders’ directors is about to follow it
There are just 41 days to Christmas. For housebuilders whose financial year-end coincides with that of the calendar, the approach of the festive season generally means a frantic rush to hit annual build and sales targets to satisfy the expectations of bosses, shareholders, analysts and the broader market.
This month Taylor Wimpey announced that it had sold all of its 2009 stock of homes, and other housebuilders are in a similar position. That won’t necessarily give them a chance to get along to their children’s Christmas shows, though: as after terrible times for the industry, a number of housebuilders find themselves gearing up to launch new sites in 2010.
So the year is ending on a brighter note, and that is reflected in the views of the housebuilding executives taking part in the PSD Group/Building housebuilders salary survey. When recruitment specialist PSD Group asked 5,000 senior managers to rate their confidence in a recovery in the market over the next year on a scale of one to 10 (10 being back to the boom) the average figure was a cautiously optimistic six.
As the housing market stabilises, some companies that had cut back staff numbers are starting to hire again, and there are hints that for some, pay packages could soon rise alongside property prices. This will be welcome news for executives who have seen salaries and bonuses significantly pared back over the past two years. Mark Heald, PSD Group’s director of construction and property practice, says: “The industry is in much better shape than it was 12 months ago, although it is polarised. In the South-east, business is taking off, but in the north of England things are not so good. We’re seeing companies hiring again, although all the placements I’ve been making so far have been in the London area.”
According to the survey, which is based on both the attitudinal survey and PSD’s own data, housebuilding professionals’ salaries dropped by up to 9% over the past year. But that wasn’t the end of their pain. Although housebuilders’ bonuses have never compared with those of City bankers, they have consistently been the best paid workers in the construction industry. This year, however, the recessionary market meant bonuses were slashed by up to 37%.
It was the land directors who suffered the biggest pay cuts: their salaries dropped 9% and their bonuses were down 25%. This was not surprising, as their deal-making skills had little value to firms whose landbanks were filled with sites bought at the top of the market. They might have looked with envy at the finance directors, whose salaries increased 1% – although along with managing directors, they suffered the biggest reductions in bonuses, at 37%. Heald says it is also no surprise that finance directors were rewarded through the recession: “Banks like RBS won’t come and offer money to anyone any more. Salaries reflect the fact that there are now so many instruments you need to use to get money. I’d expect the salary level for finance directors to continue to remain healthy.”
Apart from financial directors, the executives most likely to get a salary rise are technical directors. At least one major housebuilder is reported to be having difficulties filling a technical post, and as a result is reviewing the salary offered. Heald says technical directors are becoming prized because existing sites are being reappraised to see if more profit can be extracted from them. Andrew Wiseman, chief executive of London-based Telford Homes, says: “The need to deliver sustainable homes, renewable energy and cost efficiencies is making technical people valuable.”
However, he says he only stopped shedding staff six months ago, so it will probably be some time before he is recruiting. Ian Beal, managing director for the Midlands and South region of Miller Homes, says he isn’t ready to hire yet, either: “There’ll be quite a time lag. People will be looking at businesses in 12 months’ time and taking stock.”
PSD’s Heald says that where hiring is taking place, jobs and salaries reflect the straitened circumstances: “Most people are being employed on lower rates than previously and on lesser roles – say, as director designate with a view to getting the full role later when activity picks up. Salaries will go up in time.”
But at present, housebuilders are still receiving speculative CVs from those made redundant. The survey shows that a little more than 80% of professionals had been affected by the recession, 58% through redundancy. Of those made redundant, 37% have been out of work for a year or more, and a similar number (38%) have been out of work for six months to a year. A quarter found a new job within three months.
A less volatile market is giving cause for hope that those who are still seeking work will soon find it. Wiseman says his company is experiencing steadying trading conditions and has been pleasantly surprised by the strength of demand from overseas investors. He adds: “As the industry picks up it will probably find that people are in short supply. Unless a company has its own training programme it is inevitable that it has to put up salaries to get people.”
Heald agrees, but adds that before the industry starts to pump up the pay and the perks again, it is worth taking stock. ”Two years ago it was horrific. People couldn’t find staff for love nor money and that will hit us again, definitely, because the recession has meant that young people haven’t come into the industry. As an industry we need to make sure we don’t get back to the situation where there are big skills shortages again.”
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The PSD Group/Building salary survey was carried out by PSD Group, which specialises in senior level search and selection across the property sector. There were two elements to the research: an attitudinal survey that targeted about 5,000 individuals at senior management level across the housebuilding sector. This focused on plcs, private housebuilders and niche developers. Salary and employment trend data were drawn from this survey and PSD’s database of clients and candidates. Fur further information contact Elliot Course, senior consultant at PSD Group on 0161-2340 380.