Globalisation and Building

You could also argue that building could become cheaper in the UK as new technology and building practices helps and we have access to cheaper foreign labour. This is partly true, though advances in technology in building have been painfully slow, foreign labour is cheap but these citizens come to the UK to make a decent wage and there is a big shortage of skilled builders/tradesmen. Furthermore, any advantage or value because of cheap foreign labour in building is likely to be captured by the building company in higher profit margins – not with the end customer.

Hence I think the building companies operating on price/earnings ratios of about 6 look like good value since I’m not sure the interest rates will go up much. Demand should stay strong with supply constrained because of the slow planning process. New building practices slowly feeding through will likely improve profitability further, though I cannot see any material impact from the recent Barker report on Housing until say 2006 onwards. Technology will not take the place of housing. Building innovation is slow and is likely to remain so because of a conservative approach to lending by banks and traditional housing views of the customers.

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