Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

<< Back to Property & Construction Daily archive

May 14, 2024

RNWH | Economics – Housing ‘starts’ fall 20% in Q1, NHBC | News – Labour report urges England & Wales rent controls; Barratt teams up with Asda for new 1,500 home London ‘town centre’

Company News

Renew Holdings (RNWH, 1,002p, £793m mkt cap)

Engineering services group supporting UK infrastructure. HY (Mar) results. Rev +17%, £553m; adj op margin, 6.0% (HY 23, 6.0%); PBT +15%, £30.3m; adj EPS +14%, 31.3p; interim div +5.5%, 6.3p; net cash, £42.5m (£17.0m).

Trading: “We have successfully completed the bolt-on acquisitions of TIS and, post period end, Route One Infrastructure, with both continuing to trade in-line with expectations. We have already secured and extended a number of new and existing CP7 frameworks with Network Rail with further tender opportunities expected later this year. Investment made in tendering AMP8 frameworks is coming to fruition with extensions to major AMP8 frameworks with South East Water, Thames Water and Welsh Water; a number of new frameworks already confirmed; and several live tenders ongoing. Further operational and strategic progress delivered in Highways as we continued to execute on workbanks that are a part of five framework lots worth more than £147m. Ongoing preparations made for the start of the Road Investment Strategy, RIS3, due to commence in April 2025. Preparatory consultations have indicated a notable shift away from enhancements to maintenance work on structures, renewals and road restraints, meaning we are uniquely positioned to take further market share”.

Outlook:  “The strong momentum seen in the first six months has carried through to the start of the second half, underpinning the Board’s confidence in the full year outturn. We commence CP7 [rail infrastructure] in a stronger position than in CP6. Network Rail has committed to spending £31.9bn from 2024 – 29on renewals and maintenance, perfectly aligning with our core strengths as the network’s largest provider of multidisciplinary maintenance and renewal engineering services. There are significant opportunity available as we transition into AMP8 [water], with investment expected to be larger than AMP7, and considerable scope to leverage the combined expertise across our four water brands”.

Economic data

Housebuilding. New home registrations, as measured by the NHBC, and which closely correlated to housing starts [always released by the ONS much later], fell by 20% Y/Y in Q1. This was partly due to high starts in Q1 23, ahead of new building regulations taking force at the end of Q2, and possibly poor weather, which was blamed for depressing ONS construction output data in the first three months of this year. 21,967 new homes were registered in the quarter: private homes -21% to 13,633; rental and affordable -19% to 8,334. Without giving details, the NHBC indicated that “month-on-month increases in Q1 2024 indicate tentative signs of growth”.

Viewpoint: This was not unexpected, given the reasons above, but look out for Q2 and 3. A combination of volume housebuilders quietly piling back into the ‘oven ready’ (with full planning) land market, better than expected sales rates and a degree of post-deluge catch-up on sites, could be up strongly Q/Q and then during the second half Y/Y.


New home registrants

In other news …

Politics. Labour has been urged in an internally commissioned report, leaked to The Guardian,  to introduce ‘double lock’ rental controls for those renewing their tenancies, with any rise capped at the lower of consumer price inflation or local wage growth across England and Wales. The independent report, from Hammersmith and Fulham council leader Stephen Cowen, does not appear to call – as some in Labour have called for – for rent controls on new tenancies (although London and Manchester Mayors Sadiq Khan and Andy Burnham have called for varying rent freezes). It also calls for: the abolition of ‘no-fault’ evictions; measures to discourage landlords from entering the short-term and holiday let market; and policies to ensure that medium-term affordable housing returns to being the second-largest part of the housing sector, to decrease the country’s reliance on the private rental market. The report was commissioned by former shadow housing secretary Lisa Nandy, but she last rejected the idea of rent controls and stance mirrored by leader Sir Kier Starmer. The Guardian story concedes that “the party distanced itself from the findings, saying they do not reflect its official view”. The report will be launched on Wednesday without any shadow cabinet minister attending the event.

Viewpoint: Do some people never learn? A very similar policy was introduced in Scotland, under pressure from the SNP’s now-ousted Green Party coalition members. It stopped institutional build-to-rent investment in its tracks; landlord simply waited for the end of each tenancy before jacking up rents in a greatly under-supplied market … and now asking rents on new tenancies are rising at the highest Y/Y rate in the UK, according to Q1 data from Zoopla (see below). Four years of rental cuts for social housing, introduced by ex Tory Chancellor George Osborne caused many HAs to slash new development. There’s only one way to bring rents under control: build lots more affordable rental and BTR homes. Somewhere there’s a large thicket of long grass waiting for this report to be kicked into …

Affordable homes

Supermarket turns builder. Asda is to team up with Barratt Developments (BDEV) to build a 1,500 home development in West London, Evening Standard. The plans, creating a new ‘town centre’ in Park Royal, will feature a series of high-rise tower blocks sat on top of a new 60,000 sq ft flagship Asda Superstore and up to 400 car parking spaces. It follows a similar move by John Lewis in 2022, with the retailer submitting plans to build a 24-storey tower on top of its Waitrose shop in Bromley, alongside a nineteen-storey block to provide 353 new homes. A second development in West Ealing is also planned – and facing fierce local opposition, according to the London paper. The Asda development, which has yet to receive planning permission, would include 500 affordable homes, new retail units, restaurants, health and wellness facilities, and a ‘high-quality public realm space’.


Download Insight as PDF

This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.

Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position,  and/or may perform services or solicit business from, any of the companies or related securities mentioned.

Any prices quoted in our research are as at the previous day’s close.