Thursday, 16 September 2010
Doom and gloom for housebuilders
My attention was attracted by a succinct summary of “the grim reality facing housebuilders” in Anthony Hilton’s City Comment column in yesterday’s Evening Standard (15 September). It can be found at http://www.thisislondon.co.uk/markets/article-23878161-the-grim-reality-facing-housebuilders.do [This is not a hyperlink, so you’ll have to copy and paste it.]
The house-builders are facing multiple problems. Not only are buyers finding it difficult to raise large deposits and then find a willing lender but, when they do so, mortgage valuations are frequently coming in at less than the asking price of the property, with resulting frustration all round.
Even if the mortgage famine were to abate, there are other financial problems facing the industry. Government grants and subsidies of one sort or another, particularly for social housing (through the Homes & Communities Agency) have already been halved and are likely to be cut again.
Two further factors are adding to the gloom, and it was these two points which struck a chord with me. The first relates to the current state of the planning system. As we all know, the scrapping of regional strategic planning has left a huge void in the planning system, and many fear that the government’s espousal of ‘localism’ as an alternative will simply lead to local planning authorities dancing to the tune of the NIMBYs. Few believe that the promised financial incentives will persuade Councils whose electors really don’t want more housing in their patch to accept extra development, so even fewer homes will be built, especially in the south-east where they are urgently needed.
Hilton’s thesis is that the changes the government is making to the planning system will lead to years of uncertainty while new policies are worked out and the government’s changes bed down. There are those who suggest that it may be 2014 before things are back on an even keel, which chimes in with the view of other industry analysts that it will take three to five years for house-building to get back on track.
And if that wasn’t enough doom and gloom to be going on with, there are the continuing demands for affordable housing which, despite the scepticism of local authority planners, are a real threat to the viability of many housing schemes. Added to that is the demand for developer contributions for infrastructure, which is another overhead which will drive down the potential viability of proposed housing developments.
Finally, the ‘green’ agenda is another factor driving up costs, with ever more stringent environmental performance standards being demanded in an effort to reach the Holy Grail of zero-carbon housing.
The outlook is grim indeed, and Hilton suggests that it may lead to the banks pulling the plug on some developers, with resulting forced sales of over-valued land banks at a substantial discount, leading to a general downward revaluation of building land. I don’t see how that can be regarded as a ‘solution’ to the industry’s problems. It just confirms that the house-builders are in for a very troubled period.
As for wannabe first time buyers, frankly they stand no chance, and the government doesn’t seem to have any intention of trying to help them. On the contrary, I get the distinct impression that this government sees its constituency as being those elements in society, especially in well-heeled ‘Middle England’, who just don’t want any more houses built in their green and pleasant land. This was the driving force behind the Conservatives’ concept of so-called ‘open source’ planning and ministers are continuing to forge ahead with these half-baked ideas. The deafening chorus of dissent has not deflected them from their avowed intent, and it may take several years before the folly of their approach is borne in on them.
© MARTIN H GOODALL