黑洞社区

Figures this month from Halifax bank, showing the second consecutive monthly fall in house prices, followed widespread reports of stagnation in the housing market. Averaging a basket of indices, price rises are at their smallest for five years, while prices have been falling in London as consumers appear to be reining in spending amid fears ahead of Brexit. 

But so far the housebuilding industry, supported by Help to Buy, has carried on largely unaffected by these esoteric doubts. Companies this year continued on a five-year run of expanding output and profit, rewarding shareholders with fat dividends along the way and remaining largely debt-free. The top 30 biggest housebuilders have increased house sales by 7.5% in the last year.

All this is good news for the sector鈥檚 employees, with the same top 30 adding more than 2,000 extra staff in 12 months. So, it鈥檚 perhaps no great surprise that 黑洞社区鈥檚 annual survey of housebuilding industry director-level salaries, conducted by recruitment firm PSD, shows salaries for those at the top of the industry continuing to rise.

鈥淎 decent mid-range quantity surveyor can pretty much write his or her own pay check at the moment鈥�

Clare Smithson, Hill

But that does not mean housebuilders are immune from the warning lights flashing in the wider economy. Crest Nicholson and McCarthy & Stone have both warned on profit, while Berkeley Group鈥檚 forecasts have been hit by the fall in London prices. PSD鈥檚 research shows that staff perceive Brexit as a growing threat to their businesses, while salary rises are not as generous as in previous years, on average. One in 10, it finds, even expect their firms to cut jobs in the year ahead. With choppy waters in sight, it seems, the question for many staff is whether the risks of moving to a new employer are now worth the rewards.

Pinch points

PSD鈥檚 salary data, based on all the residential placements it has made in the last 12 months, shows director-level salaries at housebuilders up an average of 3.7% in 2018 on the previous year. While this leaves directors better off by outpacing general economy inflation, currently at 2.4%, it is down on last year鈥檚 adjusted average rise of 4.8%. However, while not stellar, the growth is broad-based. Every one of the 10 roles surveyed by PSD saw growth, and each of the eight regions. Even in London, where house prices and completions have been virtually static for two years, salaries are still heading north 鈥� up by 4.5% in the year.

So, even if the pace of salary increases is a notch down on last year, the overwhelming market dynamic remains one of huge demand for limited numbers of skilled people. Elliot Course, director at PSD, says: 鈥淭here continue to be big skills shortages. It鈥檚 really hard trying to find people with good experience who will consider a move.鈥�

Clare Smithson, group head of human resources at 550-strong South-east housebuilder Hill, which is looking to grow by another 100 staff next year, agrees. 鈥淲e鈥檙e recruiting quite heavily, and we have quite a lot of trainees, but there are a few pinch points. Unfortunately, it鈥檚 quite a small pond we鈥檙e fishing in.鈥� 

The biggest problems appear in finding people able to manage the construction end of the process, as opposed to sales, planning and development. The data shows construction and build directors saw the biggest salary increases of all the disciplines, up 9.3% to an average of 拢110,000. Just five years ago, the average salary for the same role was only 拢78,000 鈥� that is an increase of more than 拢32,000. Course says: 鈥淟ast year it was all about commercial and technical directors, but now the focus is on construction and build directors. One search we ran, we had to increase the salary three times in six months but still couldn鈥檛 find anyone appropriate.鈥�

Other delivery-end roles also saw big rises, with commercial director salaries up 5.6% on average, and this level of demand is matched for less senior staff. Hill鈥檚 Smithson says: 鈥淎 decent mid-range quantity surveyor can pretty much write his or her own pay check at the moment.鈥�

How much are roles paid?

	Scotland	Yorkshire and North-east	North -west	Midlands (including East Anglia)	London	South-east (Home Counties)	South-west	Wales	Annual bonus (shown as a % of salary)	Average salary
Managing director	拢167,000	拢158,000	拢159,000	拢176,000	拢203,000	拢192,000	拢167,000	拢155,000	87%	拢172,000
Finance director	拢92,000	拢91,000	拢90,000	拢92,000	拢150,000	拢104,000	拢90,000	拢86,000	75%	拢99,000
Development director	拢101,000	拢97,000	拢98,000	拢105,000	拢164,000	拢119,000	拢104,000	拢90,000	88%	拢110,000
Land and planning director	拢94,000	拢96,000	拢95,000	拢101,000	拢142,000	拢120,000	拢103,000	拢83,000	78%	拢104,000
Technical director	拢91,000	拢94,000	拢91,000	拢98,000	拢126,000	拢120,000	拢98,000	拢93,000	67%	拢101,000
Design director	拢83,000	拢81,000	拢87,000	拢86,000	拢106,000	拢101,000	拢88,000	拢82,000	83%	拢89,000
Commercial director	拢90,000	拢95,000	拢97,000	拢100,000	拢123,000	拢115,000	拢102,000	拢91,000	72%	拢102,000
Construction / build director	拢97,000	拢103,000	拢109,000	拢114,000	拢138,000	拢123,000	拢105,000	拢91,000	82%	拢110,000
Project director	拢88,000	拢93,000	拢103,000	拢109,000	拢152,000	拢120,000	拢103,000	拢86,000	76%	拢107,000
Sales and marketing director	拢92,000	拢99,000	拢95,000	拢111,000	拢127,000	拢115,000	拢103,000	拢88,000	82%	拢104,000
Average	拢99,500	拢100,700	拢102,400	拢109,200	拢143,100	拢122,900	拢106,300	拢94,500	79%	拢109,800

Source: PSD

Merry-go-round

This tough competition for skilled people is, of course, further driving salary inflation, as housebuilders resort to poaching staff from rivals, resulting in high offers and higher counter offers. Smithson says: 鈥淚ncreasingly, we鈥檙e all recruiting off each other. It鈥檚 a merry-go-round. Our staff are approached with job offers all the time and this leads to wage inflation.鈥� 

Alan McGillivray, group human resources director at 750-strong housebuilder Avant Homes, which works from the Midlands to Scotland, says the demand is 鈥渞atcheting up鈥� wages, with many housebuilders agreeing to mid-year salary rises for existing staff to defend against poaching. 鈥淭he wages pressure has even been growing in the existing workforce in order to retain the people we鈥檝e got. We try to do this where necessary before people are poached.鈥�

Rather than just considering staff who have put their CVs forward, this means recruiters are increasingly having to tap up staff who are not actively looking for other work. PSD鈥檚 Course says: 鈥淲hen we鈥檙e retained for an assignment, our first thought is: what is the candidate source going to be? Then, almost every time, it鈥檚 about budget 鈥� the clients have an idea about how much they need to pay, and it鈥檚 our job to educate them that it鈥檚 not going to be enough to get people to move.鈥�

But competing for talent is also having a positive side effect. Housebuilders that have so far remained resolutely 20th-century in their style of management are having to professionalise to attract millennials with somewhat higher expectations. Avant鈥檚 McGillivray says many remain 鈥渄efinitely behind the pace鈥� and that 鈥渋t鈥檚  command and control at many housebuilders鈥�. 

He says: 鈥淲e have to adapt to 21st-century management techniques and practice, which means more professionalism and engagement, with transparent career paths and investment in training,鈥� adding: 鈥淎vant has seen a big change. This competition is helping us become better businesses and develop stronger leadership teams.鈥�

鈥淲e鈥檙e seeing people promoted earlier than might otherwise have been the case鈥� 

Alan McGillivray, Avant Homes

Vacuum

This paucity of experienced staff also means housebuilders are looking outside the sector wherever possible. Smithson, who herself moved to Hill from a manufacturing business, says: 鈥淚f we鈥檙e looking for sales and marketing people, I will look at people from retail, car sales, or cabin crew 鈥� all kinds. You can teach people about selling houses specifically, but you can鈥檛 necessarily learn world-class customer service.鈥�

Indeed, McGillivray says Avant, where headcount has increased by 30% in the last two years, set up a sales academy two years ago specifically aimed at bringing in people from other sectors such as retail. Now, 60% of its sales force is in effect new to the housebuilding sector, he says.

But, of course, this only works with non-technical disciplines such as sales, or support services such as finance and human resources. For build, technical, land, planning and commercial staff the difficulty recruiting externally is making it hard to grow. Responses to PSD鈥檚 survey suggest many firms are dealing with this by attempting to grow output without hiring new people 鈥� with two-thirds saying their firms will increase unit production next year but only 46% aiming to increasing staffing.

McGillivray says this is also creating a vacuum, which is drawing less experienced staff up to senior roles very quickly. 鈥淲e鈥檙e seeing people promoted earlier than might otherwise have been the case, and we might see issues coming from this if they鈥檙e not properly supported,鈥� he says. 鈥淲e鈥檝e got to make sure we don鈥檛 burn through these people.鈥�

He says this dynamic is leading Avant to invest more in a very careful process of staff being taken into new roles to ensure they have the proper support, with a Build Academy just set up to formalise this into a three-week process. 鈥淎 site manager has a massive responsibility 鈥� we can鈥檛 just give them the keys to the shop. It means it鈥檚 not just sink or swim.鈥�

Brave face

Most of this is great news for staff, even if it is making life tough for employers. But there are also some suggestions that la bella vita may not last forever. Despite the salary rises in London over the last 12 months, Course says the anecdotal sense is that the recruitment market has slowed in the capital over the last two years. 

Certainly, the overall economic outlook for housebuilders, while by no means dire, is more challenging than for some years. Tony Williams, chief executive at research firm 黑洞社区 Value, says: 鈥淭he sector is putting a brave face on it but people are starting to be really, really cautious. Very few housebuilders are now embarked on big geographical expansion programmes 鈥� it鈥檚 peripheral compared to what it was.鈥�

Unsurprisingly, Williams suggests Brexit is behind much of the nervousness, and this is backed up by the survey. When respondents were asked to identify the top three threats facing the housebuilding market, Brexit was overwhelmingly the biggest, mentioned by 81% of respondents, compared with just half who thought it was a threat last year. This makes it a bigger threat than skills shortages and the planning system 鈥� the two big issues in 2016 and 2017. And whereas just 4% of respondents said they expected to cut staff in 2017, this has nearly tripled to 11% this year. 

In response, the expectation is that it may become harder to prise candidates from existing employers because of the security that long service provides when businesses start to cut back. London property recruiter Deverell Smith鈥檚 annual salary report, published last month, predicted exactly that, saying 鈥渃andidate movement will begin to slow up鈥�, at least until Brexit. It added: 鈥淲ould-be job seekers will delay moving to a new employer and make more conservative career decisions, [鈥�] prioritising job security over progression.鈥�

Avant Homes鈥� McGillivray, however, has not seen any sign of this caution in the North yet, but is also worried about Brexit. 鈥淚f Brexit goes badly it鈥檒l be back to the labour market freezing up. People鈥檚 propensity to move just gets lower 鈥� it鈥檚 better the devil you know in uncertain times.鈥�

With uncertain times ahead it is likely to be a case of when, not if, this market freeze happens. And when it does, it is likely to make life even harder for those businesses still trying to recruit.

What top three threats do you feel are impacting the housebuilding market?
Brexit	81%
Skills shortage	65%
Planning	54%
Removal of government incentives	32%
Interest rates rising	26%
Global economy	25%
Increased technical standards	9%
Other	8%
Acquisitions and mergers	3%

Please indicate where you feel there is a gap in experience and skills within your organisation?
	2018	2017
黑洞社区 /construction	56%	56%
Technical	45%	31%
Commercial	34%	25%
Land and planning	29%	18%
Sales and marketing	24%	12%
Managing directors	11%	11%
Finance	5%	12%
No gap	5%	12%
Specialist (eg environmental)	0%	6%

Will you be expanding or reducing head count/production over the next 12 months?
	Expanding	Staying the same	Reducing
Headcount	46%	43%	11%
Unit production	67%	30%	3%

 

Average increases from 2017
Role	Rise
Construction/build director	9.3%
Commercial director	5.6%
Finance director	4.5%
Development director	4.4%
Sales and marketing director	3.9%
Design director	3.2%
Technical director	3.0%
Land and planning director	2.3%
Managing director	1.8%
Project director	1.2%

 

Average increases from 2017
Region	Rise
Midlands (incl East Anglia)	5.6%
South-west	5.1%
London	4.5%
Yorkshire and North-east	4.0%
South-east (Home Counties)	4.0%
Scotland	2.6%
Wales	2.3%
North-east	1.6%

Source for tables: PSD