Summary
• HobsonFord’s research is based on NHBC data from 1987-2010.
• There has been a swing away from apartments, back to “family” housing.
• The reduction in social housing due to public sector cuts is having an impact on timber frame.
• Housing shortages will cause the pendulum to swing in timber frame’s favour in future.

The immediate outlook for construction is a challenge, with housing stuck in a rut and major reductions for social housing investment due in the short term. But the timber frame industry should prepare for busier times when the market recovers.

Timber frame has enjoyed spectacular success over the past 15 years, increasing its share across the UK housing market from less than 10% in 1999, to around 25% in 2008 – although it fell back to around 20% in 2010.

These figures are revealed in our Market Insights report and based on data supplied by the National Housebuilding Council (NHBC) of more than four million new properties over a 24-year period, from 1987-2010. The research, never previously undertaken on this scale, provides detailed insight into new house construction over more than two decades and is updated each quarter by HobsonFord.

House types

The report, Trends in the mix of UK new build housing, shows that prior to 1999 there was very little change in the overall mix of new housing from one year to the next, but over the past 10 years there has been a dramatic shift in the mix of house types.

For example, the figures show that in 2010 there was a rise in family housing – three- or four-bedroom houses as opposed to apartments. Family housing reached a 54% market share of new build that year, up from a low of 40% in 2008.

This has had a major impact on the housing sector and demand for certain products and services – so it is no longer sufficient to ask whether housing starts will be up or down; people need to understand how the mix of new housing is changing.

The changes in the housing mix identified in the report have helped timber frame to grow fast and gain share over the past 15 years, especially in affordable housing and in Scotland. The sector grew its share of affordable housing from just under 10% in 1999 to around 40% in 2010. It also has a remarkably high share of the market in Scotland at just under 80% in 2010 (40% in 1999).

London has also been an important market and timber frame increased its share from around 5% in 1999 to around 15% by 2010.

The share of timber frame used in “free market” housing (housing that receives no government subsidy) in London, increased from just under 10% in 1999 to around 20% in 2008, but fell back to just over 10% in 2010, reflecting a switch back to masonry materials during the recession in this sector.

Although the use of timber frame in new housing is most concentrated in Scotland and London, accounting for 37% of all timber frame use in 2010, affordable housing schemes across the rest of England have also been a major market, representing a further 44% of its use in 2010. In contrast, free market housing outside Scotland and London, which accounted for 70% of use for traditional materials in 2010, only accounted for 19% of timber frame demand.

Short-term impact

Changes in the mix of new housing will have a negative impact on timber frame over the short term, mainly because of reductions in government investment in affordable housing. For example, there was a 6% swing towards free market new housing outside London and Scotland in 2010, a trend that is likely to continue. Reductions in affordable housing supply, which are almost inevitable given cuts in public spending, will have a disproportionately high impact on timber frame, precisely because it has been so effective in this sector in the past.

The substantial increase in the proportion of affordable housing in 2009 and into 2010 was a lifeline for the timber trade, driven by the government stimulus packages announced in 2009. The collapse in demand due to the fall in new build housing was a serious blow, but demand for timber frame could have been lower had it not been for government support.

Policy changing

But all is not lost. The supply of housing remains at an unsustainably low level and government policy is changing to increase new housing supply. Exactly when and how this will happen is not clear, but one thing is very clear – the UK will need much more housing over the next 10-15 years than is currently being built.

Of course, this will precipitate the pendulum to swing the other way and the timber frame industry must be ready to meet the demand. We are already hearing rumbles of discontent from the building trade – the return to traditional construction methods [masonry] has caused problems in supply of both materials and skilled labour. The big players are anxious to avoid a repeat – Persimmon is continuing to invest in its Space 4 timber frame system, with a view to being ready when housing demand takes off.

Timber has demonstrated it is a viable and practical construction method – and now is the time to prepare for what will become a major and sustained increase in the UK housing market.