Abstract
This paper examines trends in the operation and financial performance of major UK housebuilders shortly before, during and after the global financial crisis (GFC) in 2008. It outlines two contrasting explanations of what has happened in the sector over this period. The first is described as an ‘institutional recovery’ perspective, in which a period of initial retrenchment after the crash was followed by steady reinvestment, and then a cautious move back to growth by the major housebuilding companies. This is set against what we describe as a ‘financialised recovery’ perspective. This explanation stems from our own analysis of the annual accounts of major UK housebuilders since 2005. It reveals the impact of the intensive financialisation of a sector initially weakened by the GFC, but where the strategic primacy of maximising shareholder value has been asserted more strongly than before. Our analysis of dividend payments post-GFC reveals this in the starkest of terms. We suggest that the sector has been in more robust financial health than implied by the ‘institutional recovery’ narrative, but that significant value is being extracted out of these companies, and indeed the sector overall, by institutional investors. The analysis provides unique insights into the financialisation of housing production, an issue which to date has received only limited attention. We reflect on the implications of identified trends for housing supply in the UK. We also sketch future research possibilities to examine the ongoing impact of intensive financialisation and the capital flows into, and out of, major housebuilders.
Highlights
This paper examines how financial processes connected with housing production in the UK have changed in the wake of the global financial crisis (GFC) of 2007/8
Previous research (Payne 2015, 2019) into the performance of large UK housebuilders, based on accounts given by developers themselves, has suggested that these companies struggled to recover from the GFC and took time to reinvest, before moving into modest growth
The analysis in this paper reveals striking increases in the profit per unit derived by the largest UK housebuilding companies in recent years, along with a historically unprecedented rise in their dividend payments
Summary
This paper examines how financial processes connected with housing production in the UK have changed in the wake of the global financial crisis (GFC) of 2007/8. Previous research (Payne 2015, 2019) into the performance of large UK housebuilders, based on accounts given by developers themselves, has suggested that these companies struggled to recover from the GFC and took time to reinvest, before moving into modest growth. We trace movements in housing completions, profits and dividends in order to chart the patterns of capital flows in the sector This analysis reveals a sharp increase in the scale of value extraction from the sector since 2010. The paper is intended as a contribution to literature on the financialisation of the housing system, focussed on housing production, examining recent trends in capital flows and value extraction. The paper finishes with a discussion of the implications of our empirical analysis for housing supply and for future research into housing financialisation
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