Avant Homes CEO puts hot topics under spotlight at property event

The chief executive of housebuilder Avant Homes gave an honest overview of the industry and explained the current market conditions at TheBusinessDesk.com’s property professional lunch on Thursday.

Colin Lewis, who has been at the helm since 2010 and implemented a turnaround of the business, spoke about many issues in the residential housebuilding sector, including land banking, leaseholds, Help To Buy and new homes targets.

Lewis said that there was very definitely a market in the north and that his firm’s ambition was to be the home-builder of choice in the north. Yet, he repeatedly told the more than 90 delegates that often the housebuilding sector didn’t help itself.

He asked the audience whether the North had become the “forgotten land.” Lewis said: “The south is struggling. The whole of the UK is meant to feel bad but I don’t because the north is playing such a strong part in the residential housing sector.”

Lewis said that house prices in the north had grown for the fourth quarter in a row, proving that it was stronger than in the south. “There has been a gradual decrease in the south and acceleration in the north. The north has seen the fastest growth since 2014,” he said.

Lewis is a supporter of Help To Buy, which has been under fire in recent months for whether it increases housing supply and gives first-time buyers the chance to get on the housing ladder. He said that 30% of Avant Homes’ business came from the scheme but criticised the way it has been used in the industry.

“Help To Buy was intended to give people the opportunity to buy homes that otherwise they couldn’t afford. That inherently has to be a good thing,” said Lewis.

“It is meant to increase supply of new homes, but has it?

“If you look at the top five housebuilders, they have grown volume by a measly 6%. What they have done is grown in profits, paid themselves phenomenal bonuses or are in the process of paying themselves the bonuses, and returned enormous capital to shareholders but haven’t really increased supply.

“My criticism is not of Help To Buy, it’s of housebuilders not using it in the way it is intended.”

Lewis said he was a big advocate for leaseholds, which he said had been historic in many parts of the country and especially so in Yorkshire. He said that land owners didn’t set ground rents at ridiculous levels but at levels householders could afford.

He added that the core of the problem was that housebuilders realised they could boost profits if they could increase the rental income they could set under a leasehold. “They are not thinking how much that adds to the homeowners,” said Lewis.

“Rather than trying to outlaw it – and I was giving evidence to the government arm making all the enquiries on this – my strong opinion is that we don’t need to. We need to ensure we keep it and regulate it.”

The chief executive said he hoped the Letwin review, an independent review currently being run to understand why hundreds of thousands of homes haven’t been built across the country to meet the housing shortage, would look into the issue of land banking.

“We do not bank one centimetre of land because as soon as we buy it and have the permission that allows us to build, we build. I think that is the same of all house builders,” said Lewis.

He called for transparency around the whole planning process, from the length of time between acquisition to gaining planning consent – including details such as outline planning and reserve matters. Lewis said land often ended up sitting in a housebuilder’s supply chain before they could get on she site due to issues with getting council agreement.

Lewis said more power and strength needed to be given to planning officers.

“We don’t land bank as an industry but we don’t help ourselves. Housebuilders like to tell you how much land bank they have and how many plots they have got, as well as how much they have in strategic land banks. It looks like you have seven or eight years land supply.

“If housebuilders were honest and said that they had three to four years land supply and we have got that, it would take the sting out.”

In terms of the 300,000 new homes per annum target set by the government to meet housing needs, Lewis said: “We haven’t hit that since the 60s and that was subsidised by a massive council house programme at that time.

“I don’t think we are going to get these targets. We [the housing industry] just don’t invest enough.”

“We are going to need a generational change. Housebuilding isn’t about standing in armpits to mud. It is a much bigger industry. There are careers in design, marketing, surveying; a whole host. Housebuilding is an extremely well paid industry. We have got to educate people. We need to invest in kids and in schools.”

Avant Home is about to embark on a curriculum programme in schools, which Lewis said was just £6,000 per school to support, and he hoped would start to see the next generation be inspired to become part of the sector.

“It has got to take time. We have to continue to invest and if we don’t, we won’t hit those targets. The targets are denounceable because they are not deliverable,” he added.

“It is shameful to use housing and peoples’ aspirations about their home as a political football. I think we need policy not politics to solve what is called the broken housing market housing issues.”

Of the current housing market, Lewis said that the national picture was heavily influenced by how people feel in the south.

Agreed sales and new buyers down were down, the price indicator is flat; which Lewis said was heavily influenced by South East and London. During March, he said, overall new buyer enquiries were down 10%, agreed sales 30% down. Yet, over three months, house prices have risen 10%.

“This tells me something is happened. There is a strong interest in property,” he reflected.

There have been record monthly visits and a 1.6% annual price growth, showing a price sensitivity.

In Yorkshire housebuyers are paying 96.5% of the asking price. “While there is price sensitivity, it is not so great as to make a massive disparity what people are prepared to and wanting to pay for properties.

“What we have is a normal market. Nobody knows what it is – but surely whatever it is – the fact it is not bust or hitting peaks all the time is a positive. We don’t want boom or bust, we want a relatively consistent marketplace, which means we can invest and be confident about results.”

Avant Homes last week published their latest annual figures. While pre-tax profits were still being audited, Lewis said the firm will have more than trebled profits since 2016.

Revenues over the 12 month period were up 21% to £447m, driven by rapid growth in completions and continued increase in private average selling price, Avant said.

Avant’s new, five-year strategy to double output to 4,000 homes a year by 2023 is now in place.

In terms of the markets in 2018 so far, the firm’s measure rate of sale has seen a sale a week on every outlet. “We are not a high volume housebuilder. We are happy with the rate of sale and will continue to invest in tactical and brand advertising, said Lewis.

“There is a mixed but strong appetite for new homes. In my opinion, the housing market is okay and I hope it stays like that.”