Persimmon situation may accelerate burst of Help to Buy bubble – Housebuilder & Developer

  • Date: 08/03/2019

Following the release of today’s Construction PMI figures, Phil Harris, Director at BLP Insurance, comments on the sector:

“After skirting precariously close to the abyss, the construction sector has fallen into contraction (49.5) for the first time since March 2018. The main symptoms are a fear of a potential Brexit cliff face, lethargic commercial activity and major concerns about the long-term viability of Help to Buy.

“Despite Persimmon’s bumper £1bn profit announcement last week, the contracting behemoth has been struck a hammer blow after Housing Minister James Brokenshire’s assertion that its role in Help to Buy is to be reviewed. While the optics don’t look good, especially as taxpayers money is involved, Persimmon has done what many others are doing – taken advantage of a well-meaning if ill designed initiative to boost profits.

“In dragging Permission over the coals, it seems that the government is finally waking up to the false economy that is Help to Buy. The scheme has been propping up the residential sector and keeping prices artificially high in an otherwise stagnating market. Its collapse could leave thousands of first time buyers in negative equity, with the aftershock having the potential to severely impact on the wider industry – blowing the government’s optimistic housebuilding targets out of the water in the process.

“Elsewhere, the spectre of no-deal Brexit continues to loom large, gripping the industry in a state of trepidation. One very real threat is the visa implications for EU workers post-Brexit. The government had tentatively put forward plans to limit long-term visas to those earning north of £30k. In an industry already struggling to attract entry-level recruits and low skilled labourers, this misguided legislation would be extremely damaging.

“While the commercial sector continues to suffer, there has been a noticeable uptick in the demand for warehousing, a very clear indication of the shifting dynamic of the retail market, where online business is king and ‘pick and pack’ warehouse space is increasingly vital to prosper.”

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