SUMMARY OF REPORT CONTENTS

The new build market for heating and electrical systems was worth approximately £350 million during 2003, showing moderate annual value growth of between 3-5% between 1999 and 2003. Estimates indicate that the new build market represents approximately 16% of the total domestic heating market, approximately 27% of the domestic UK lighting market, and approximately 22% of the total UK domestic wiring accessories market. 

In 2003, the new housebuilding market was one of the leading sectors within the UK construction industry, contributing just over 31% in terms of output value.  Output in the overall housing sector now stands at over £15 billion, compared with £12 billion during 2002, reflecting the general buoyancy of the market during the year. Of new housing work, private sector output showed increases during 2003 of 27%, with public sector housing also rising but at a lower rate of 17%. 

Private sector new housebuilding levels have remained relatively low against rising house prices, and although completion levels increased marginally in 2003 there are no indications of any significant upturn in output.  The issue of housebuilding volumes has continued to rise up the political agenda with the publication of the Barker Review in March 2004, which highlights current problems in planning, brown-field developments, land banks and lack of skilled labour, which are all restricting the potential to increase volume output.

Despite initial reservations by the housebuilding industry at the beginning of 2003, it was a relatively healthy year for house prices and the housebuilding sector in general, characterised by housing growth in the regions away from the South East. Levels of housing completions were maintained during 2003 and rose by 2% to reach some 175,000. Forecasts for the completions sector indicate estimated growth levels of between 2-3% per annum between 2004/7. Factors underpinning this growth include the relatively low level of interest rates and the forecast levels of spending on social housing committed by the government in its Sustainable Communities Plan, which aims to provide 200,000 homes by 2016 in the four growth areas in the South East and should contribute significantly to completion levels over the next few years.  Housing Starts increased by around 3% from 2002 to reach 187,000 in 2003, with levels reported to be up 4% in March 2004 on the same period in 2003.

In recent years the new housebuilding market has changed considerably with the number of housebuilders greatly reduced due to consolidation within the market. There are around 20 quoted housebuilders in the UK with a market capitalisation of between £20 million and £1.5 billion. The largest player by volume is Barratt Developments, closely followed by George Wimpey and Persimmon.  These three firms continue to dominate in terms of unit completions and together accounted for an estimated 22% of the market during 2003.  Taylor Woodrow has continued to prove itself a key player in the housebuilding market with the acquisitions of Bryant Homes for £540m in 2001 and Wilson Connolly for £499m in October 2003 – the largest corporate acquisition in the housebuilding market during the year. 

In 2003 the total UK domestic market for heating and electrical systems was estimated to be worth around £1.8 billion at manufacturers selling prices with forecasts indicating annual growth of around 3% to reach an estimated total of almost £2 billion in 2006. The overall domestic heating market was estimated to be worth over £1.1 billion at manufacturers selling prices, with the central heating sector, composed of boilers, radiators, pumps and controls representing 65% of the market and worth around £733m (MSP).  Water heating products are currently estimated to represent around 14% of the domestic heating market, contributing a value of around £157m at manufacturers prices. This sector consists of gas water storage and electric water heating. Gas water storage is the largest segment in this sector, currently estimated to account for around 68%.

In 2003, the total domestic electrical systems market was estimated to be worth around £689m in manufacturers selling prices, an increase of 2% on the previous year.  Within this market, the domestic wiring accessories market was worth an estimated £268m (MSP) in 2003 and the domestic lighting sector an estimated £421m (MSP), representing around 33% of the market in 2003. 

In 2003 the new build market for heating installations was estimated to be worth £175 million and new build electrical systems had a similar approximate value of £175 million. During 2003, the new build market for wiring accessories was estimated to be worth £60 million, while new build lighting was valued at approximately £115 million. 

Developments within the new build domestic heating and electrical markets are driven by a number of regulatory, environmental, technical and social factors, with the main trends in the market focussed on changes to parts L, P, G and J of the Building Regulations, an increasing use of sustainable and renewable forms of energy and fuel efficient appliances and technological advances in smart home technology.  Commercial developers are increasingly being faced with the challenge of making homes more energy efficient, whilst retaining economic viability. With energy costs predicted to rise together with increasing consumer desire to reduce heating and electrical running costs within the home, housebuilders are now looking beyond the more traditional forms of energy provision to photovoltaics, combined heat and power schemes, ground source heat pumps and condensing boilers.

Within the electrical systems sector, there have been a number of trends emerging including an increase in the number and type of domestic appliance, the growth of home entertainment systems and an increase in personal computer ownership and home-working practices. Future demands on electrical installation equipment may see the introduction of compulsory low energy lighting, home security systems linked by broadband, increased use of air-conditioning systems due to climate change, heating and lighting controlled remotely via the internet or mobile phone and smart cabling solutions to control security, lighting and home entertainment.

The AMA survey conducted included a cross section of local, regional and national housebuilders, confirmed a number of key trends, which have taken place over the last four years since the previous survey. 

Over the last four years there has been an increase in the general understanding about the SAP ratings.  All of the housebuilders questioned were certain as to the percentages of their new build homes that achieved the recommended rating of 80 or more and in addition more private housebuilders are adopting the Building Research Establishment’s Eco-Homes scheme as measurement of the environmental credentials of their developments. 

The survey also revealed that although central heating is still a very popular heating choice installed within new build homes during 2003, other types of system are becoming more popular with housebuilders. Traditional boilers have become less popular and are now being replaced by combination boilers, especially in smaller homes and flats and condensing boilers, which achieve higher levels of energy efficiency.

Recent trends in the new build sector are characterised by a demand for larger, executive homes, increased Internet penetration and personal computer ownership and have led to most housebuilders now fitting a higher proportion of power points into each room, on average four or more.  Many developers are now reporting increased consumer demand to fit four or more power points per room as standard, citing increased computer and home entertainment usage as the primary reasons. The survey also revealed that an increasing number of products are now being fitted ‘as standard’ by housebuilders in new homes including shaver sockets, dimmer switches for lights, alarm systems and security lighting.

Technical and brand specification for heating and electrical products are still mainly the preserve of the housebuilder themselves, although an increasing number of architects, either ‘in-house’ or external, are now performing this function.  Purchasing and installation responsibility is still overwhelmingly undertaken by a sub-contractor, and an increasing number of housebuilders now have a national agreement purchase in place for the procurement of products, usually undertaken as a centralised, head office activity.

Important considerations when specifying and purchasing heating and electrical products in new build homes include product specification, product value and price, product availability and distribution, manufacturer quality assurance and after sales service. These criteria were deemed as essential to ensure that systems continued to perform to specification, meet environmental criteria and offer best value for the consumer.