FOR someone who could, or perhaps should, be panicking about the recent collapse of buyers in the housing market, Ed Monaghan prefers to take a more philosophical view. The managing director of family-owned housebuilder Mactaggart & Mickel says: "Chairman Derek Mickel always reminds us by saying there is nothing new."
Being a small, privately-owned company has its benefits. While the share prices of national housebuilders such as Barratt and Persimmon are being hammered, M&M can sit tight. The Sunday Times Rich list estimates the Mickel family en
joys a fortune of £125 million – the same as David and Victoria Beckham.
That isn't to say things aren't bad in the house-building business. "I don't see anybody bucking the trend," says Monaghan. "The only thing that I can detect that has been different this time around is the speed."
According to Mickel, seven weeks ago the market dried up. Banks all but stopped mortgage lending and housebuilders began to feel the pain.
But in housing, when the going gets tough, the tough often start to offer incentives to encourage buyers back to the market. The size of the incentive is in exact proportion to the level of desperation of the builders to sell.
Last year, some were offering iPods, while others were offering new cars. Flip through any new homes supplements and now, some housebuilders – and some private sellers – are offering cash rebates of up to £50,000. In a volatile market, this helps sellers to keep the value of housing inflated, while still maintaining a flow of business.
What M&M does, however, is different. Its secret weapon is a shared-equity scheme, whereby M&M maintains partial ownership of the property. The company devised the scheme in 1981, during the first of the late-20th century housing-market crashes.
"Then it was dusted down and freshened up in 1991," says Monaghan. "And, unsurprisingly, it has been dusted down and freshened up for 2008."
The deal is people can buy homes for 80 per cent of the value while M&M maintains ownership on 20 per cent, which it realises when the house is sold.
"It says something about the confidence we have both in our product and the marketplace," says Monaghan. "That can only be valuable whenever it is eventually sold. We believe we will get our 20 per cent-plus back. If we didn't, we wouldn't be open to take the investment.
"Since 1981, the company has made a profit year on year from its major ownership investments being realised. It is a real test of the business model."
M&M builds about 300 homes in Scotland a year and maintains it will raise that to 500 a year. Last year its turnover grew from £38 million to £53m, while profits hit a record £16.5m.
This compared well to competitors. In the year to December 2006, Bett Homes-owned Manor Kingdom, which last month announced it was cutting staff, had a turnover of nearly £62m but only made a profit of £4.3m.
There are a number of things that are different at M&M. One, while it didn't target buy-to-let investors, it now no longer misses them as their numbers have decreased. Monaghan admits M&M didn't actually discourage buy-to-let investors, it just never encouraged them.
Nor did it go in for "urban regeneration" developments in the form of one- and two-bedroom flats. Although several builders went down this route while two-bedroom flats were the most lucrative to develop and still easy to sell, M&M resisted. It agreed with another Scot, Andrew Carnegie, that "pioneering doesn't pay".
Monaghan explains: "We purposely never chased the high- density, riverside developments. We didn't think they were wrong; we thought other people were better suited to it. We focused on low-rise flats and traditional family homes. That was our focus and in many ways remains our focus.
"Our route has been tried and tested: family homes in good locations. We have flats in the portfolio today, but we aren't awash with flats either."
Most of the company is owned by the extended Mickel family, as it has been since the company was established in the early 1900s when it joined forces with the Mactaggart side of the business to build tenements in Glasgow. The Mactaggarts were bought out in the 1950s. There are a handful of some outside shareholders in the business, but these amount to less than 5 per cent. The company also holds a portfolio of about 500 rental properties built for returning soldiers after the war, which provides a regular income.
M&M banks with Royal Bank of Scotland, but is not as highly leveraged as some of its competitors. "We have to borrow to buy land," says Monaghan – but unlike other housebuilders, the company is still adding to its land bank.
It advertised at the Royal Highland Show to demonstrate it was still in the market. "We may be one of the few builders who are doing that," says Monaghan.
There are, however, no plans to grow the business. Although M&M bought up the timber frame business of Kelvin Homes when that company went into receivership last year, Monagahn doesn't see M&M likely to make the same sort of opportunistic acquisition in the next year or so.
In times like this it is difficult to make firm plans. Monaghan doesn't even rule out the possibility the downturn will affect the group's 275 employees.
He explains: "As the market stands, if you ask what I'm doing next week, I'll be running this business. If you ask what I'm planning to do next year I don't really know yet."
Nevertheless, while many around him are worrying, he remains confident "on the basis that I've seen it and done it: in 1981, in 1991 – and if I have to add 2008 to that list, I'll happily do that. My other board directors can remember 1974 and before that. That is the nature of the business we are in.
"It's not the time to be complacent, but I don't think this is the time for panic either. The industry resembles an episode of Dad's Army, where you have Private Fraser running about shouting 'we're doomed'. On the other hand, you've got Corporal Jones shouting 'don't panic'.
"You need a bit of Sergeant Wilson with a commonsense approach to where we are."
