2014 in a few words – pretty good year

This is my last blog of 2014. This time next week I will be preparing to jet off to the wintery slopes of Switzerland for a spot of skiing over the festive period. I leave the UK in a very good mood for three reasons:

·         It’s Christmas and I love the festive period;

·         Working with a business that has come along so much in such a short space of time; and

·         The market is doing a pretty good job at recovering.

Always surprises me how long data takes to collect in this digital age. The October results for construction were shared this week. Yes October! The goods news was that £6bn of contracts were awarded in October with 21% above the Midlands, so things are moving in the right direction. The Autumn Statement also provided a glimmer of hope with some large scale infrastructure projects coming down the line.

As shown below, the Yorkshire region took 5% of contracts but the south still dominates. Looking at the bigger picture, the number of construction projects within the UK in October increased by 5% on September, and is 1.9% higher than October 2013.

Now is that something to feel cheery about or not and it sort of replicates the sentiment of the industry. Having met with a number of businesses and intermediaries this week it is wide spread cheer. The order books are stabilising and growing, the bank balances (or debt balances) are looking healthy but (and it’s a big but) people are still nervous. Remember construction output in Q3-14 only increased by construction 0.8% and is still 8.2% below its 2008 level.

While the headline economic indicators continue to point to a strong outlook, there is increasing evidence of a slowdown in the Eurozone, particularly the German economy showing evidence of slowing growth. There was some evidence of a slowdown in the UK housing market but forward sales for major housebuilders remain strong. We are yet to see the impact of the recent changes to stamp duty, which can only help our housebuilding friends.

So I started feeling positive and finish feeling uneasy. The market and those within it have been burnt and it will take a lot to make us smile from ear to ear. The signs are there and we remain hopeful but this New Years the champagne will simply be a celebration with the family rather than the thoughts of a prosperous 2015.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend, have a Merry Christmas and all the best for 2015.

Lee

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Stamp duty and residential REITS – what a week!

Awkward conversation with two friends yesterday, one had just completed his house sale and the other was delayed. Lucky sod having it delayed as it saved him a few thousand, unlucky the former.

The Autumn Statement brought a few bits of good news – housing benefited with the announcement of 13,000 homes in Bicester and of course from yesterday, stamp duty was reduced for 98% of the UK and the remaining 2% can probably afford it. This is a very positive move and certainly helps individuals get a foothold on the property ladder. But is it all really smiles and cheers this festive period. Based on the average house price you are looking at saying about £4,000 on stamp duty. That does not solve the problem of the deposit, which for some people can be four times that amount.

The problem is that housing/residential is booming across the UK and this is evident from the Mill Group preparing to launch a residential REIT. This is a new concept, untested in the market place. It certainly does sound interesting, but couple this with how it is funded – crowdfunding! Talk about reaching a wider investor base.

I discussed the concept with a couple of bankers who made it clear, they would struggle to lend to a residential REIT until they are proven – so why would you not use crowdfunding, it makes sense and provides people a place to put their cash where it earns more than in a bank account. My first pondering was that the money would be used to development stock in areas with demand, however they have taken the route of buying stock already out there. It’s a good start.

As the REIT prepares to list, with an ambition of raising £50m to invest and 10% share return, I want it to succeed but at the same time not. I like the UK for its “buy” mentality, people own their homes. The more European model of renting makes me wonder what do you leave behind when you leave this world.

I’d love to hear your thoughts on a residential REIT and stamp duty.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Should you appoint within or from the outside?

A thought has occurred to me following a discussion with a client – can you really find the right person to work for you?

In the last week there have been some changes at the top for large businesses – Laing O’Rourke and Persimmon. The first has seen their European commercial director and managing director of Canada exit and additions including a former financial director of a Yacht business and a former chief executive of an M&E specialist. These are two contrasting appointments – one from the sector and one not. You could look at this as odd but at the same time it brings a fresh perspective as building a building could be analysed as building a yacht – the main difference is surely the size. Persimmon has likewise gone for an appointment in the industry.

So what is the best option – insider or outsider? At the core of every job is a set of skills that should lead to success and by boiling these down you do find that certain industries are very similar, the main difference sometimes is the contacts and experience will make the job that little bit easier. But do we all really want an easy life? Working with two clients in recent times has seen appointments from outside the industry and the fresh pair of eyes on the business has highlighted areas where the strategy can be made stronger – surely this is a good thing?

You end up back at the skill base. I have frequently said that a construction or property business is unique to other industries, based simply on specific points that only tend to occur in the industry. But strip it back, you offer a service/product to a client which you pitch to them, hopefully win the work and then deliver (hopefully within budget). You then make some money. That could describe a retailer through to a property business.

It seems to me that the right person for the job is not always the most obvious person. If more businesses took a risk and broadened their search you may find a hidden gem. Go on be brave.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Is construction pushing the economy higher

I read a statistic this week  that the construction industry is forecast to grow by as much as 23% by 2018 – a whopping £12bn contributed to the UK economy. But in stark contrast, the number of profit warnings for construction companies is on the increase – which point is right? Well I think they both are.
The Construction Products Association’s (“CPA”) autumn forecast, published in October 2014 highlights a number of areas for growth:

·         Road construction to increase due to Highways Agency’s capital funding increase;

·         Rail output growth for a couple of years before tailing off; and

·         Infrastructure spend to grow.

So here is the disconnect, we hear construction industry and assume a building yet the industry covers a wider array than just the latest office block. Take the M1, we’re all enduring 50 mph yet the people behind the ongoing work are in the construction industry.

I recently discussed the perfect storm in the property market, yet despite the scarcity of labour and materials it is now widely accepted that if you weather this storm the growth is yours to take. A bit like 2008, those businesses that survived the recession came out in a much better financial position – what’s another year or so.
The growth, as well as the points made by the CPA, comes from:

·         Garden cities: Appropriate sites are being identified and I expect post-election plans will be put in place for a significant number of developments, with the Lyons Review noting 500,000;
·         Planning permissions: Improvements to the system will allow for a quicker turnaround on future housing and development – this will bring forward a number of schemes; and
·         Affordable housing and other incentive schemes: A wider push to keep housing affordable or financing accessible will keep the market moving.

So I come back to the start. A number of profit warnings – this reflects those businesses unable to adapt quickly to changes in market conditions. This is not always their fault but a market that is new to all. To me 23% growth feels high and with so many variables it is difficult to see how it can be achieved but look at the potential for the future which clearly points towards growth in the sector.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Moving on up….North

A lively debate last night at the local – the usual stuff, Yorkshire versus Manchester but outside the pub an alliance is being formed. With recovery under way and a number of proposals being tabled that will bolster the economic regeneration in Northern England – old rivalry is being shelved as we all simply climb into bed with each other for the benefit of the economy.

November saw the Government make a number of pledges to us Northerners; with George particularly highlighting his plans for a Northern Powerhouse (catchy!). Underpinning this will be HS3, a much improved rail network slashing journey times that not even HS2 can achieve. Oh and the best part is that HS3 arrives years (some may say light years) ahead of HS2. Sounds like a good investment to me.

Just look at the improvements in time. HS2 will knock 10 minutes off a journey to London while I’ll be in Manchester in just over 30 minutes (as opposed to the unknown at the moment).

Is all this a sympathy vote though? The North was hit hard during the recession and particularly the construction sector in the North East where the industry contracted by almost 40%, according to the Office of National Statistics.

Now it doesn’t bother me that Manchester are leading the charge, I love Manchester and think the city has such potential. A recent visit to Manchester just demonstrated how far it has come since I left University in 2005. Even my old building has been removed and replaced with a sparkly new one. Large investment and partnerships for residential, Spinningfields and the Cotton Building are all showing that construction is back on track here. But it’s not all about the mancunians.

Leeds, and to a lessor extent Sheffield, are also pushing ahead. The number of speculative buildings is increasing and as we sit in our offices we overlook the impressive Wellington Place that seems to be going up in record speed. In a recent interview Tom Riordan noted that over the coming years there will be companies that surprise us moving to Leeds. Exciting times. Just makes you want to smile.

So each city is moving in the right direction, by 2027 we should be better connected (you never know they may have finished the M1 by then!). I guess you have to request that the roads are invested in. The M62 is still a big thing in the North, and when it grinds to a halt it causes ramifications.

Having a grand vision is one thing, but delivering it is another. Osborne’s “Northern Powerhouse” has much in common with the “Northern Way” - former deputy prime minister John Prescott’s equally grand plan to, yes, improve east to west transport connections. While announced with great fanfare, this project yielded few tangible improvements. Let’s cross our fingers and hope then.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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The Perfect Storm (and no not the movie!)

I do like to be positive wherever I can so stay with me on this way as it starts pretty low.

Following a number of years of construction businesses surviving by any means the perfect storm has been created in the construction sector. During the recession a number of contracts were taken on at low margins – mainly to keep people busy and pay the bills. The problem now is costs are rising and until the better margin contracts come through the businesses are being squeezed. The evidence of this is in the market place with a number of contractors issuing profit warnings.

Another sad factor is that with a steep upturn in growth there is becoming an ever increasing shortage of resource across the board. These pressures on the supply chain are then resulting in increased prices – yet another whammy to the industry.

But why is there a shortage? Well if you take labour, this simply reflects that there was little investment during the recession in the skill. The old hands ticked over while new graduates sought employment anywhere they could. The increase in work now means that there is a lack of the skill base needed; however there is hope – people are doing the training, the degrees, the apprenticeships so be patient and look for the right people. A combination of good advertising and marketing and willing to invest in your employees will benefit you in the long run.

So where to next;

• Legacy contracts are what they are and they just need managing out. Businesses should seek variations though I completely accept this will be difficult.
• Increasing costs of a business are a short term threat until the improved margin contracts come through. The more I speak to bankers the more I realise they don’t like surprises. Be upfront with them, can’t guarantee it will count but if you don’t ask you don’t get and it may help you survive those tough months.
• Invest in people. This is a global message not just industry specific. We are a nation of dying trades yet construction is one we will always need.

The media message is of course taken to the extreme but the more businesses I chat to, the more you see the problems. Shortages and rising costs are here, we have to accept that but as the market settles and income hopefully takes a positive turn things should start to smooth out in late 2015.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Devlish times in the housing market

Happy Halloween everyone - at a time of the year when things get a little ghoulish and the parents amongst us trudge around our local community watching our children consume vast quantities of sweets, I start to wonder are things getting scary in the property market. Did you see the September house price numbers? Yep they fell, and even worse for us folk in Yorkshire as they fell by 2.2%.

Now you can read into this what you want but to me it’s just a fall. Like a lot of things, for example the stock exchange, the cost bounces around a little. Over the past few months there is growth and this is expected to continue longer term – though there is a realisation that it will taper off eventually, just a case of when.

Housing is spoken a lot at the moment and only recently the Conservatives noted tax exemptions to developers who sell homes at 20% below market value to under 40s who have not yet purchased a property – such a long list of criteria to the point where paying the tax is probably cheaper and easier. Eric Pickles claims 200,000 houses have been delivered by the government which feels a low number to shout about, given the current estimate for new houses per year is higher than this.  It just all feels like it’s spiralling out of control and perspective.

Land is this country is scarce and as certain items needed to build housing. As someone who lives in the countryside, it is troubling to hear that future developments may be constructed in green areas simply because housing needs to be built. Locally 4,500 homes are forecast to be built over the next 10-15 years. I look around and simply thing where! The UK needs to be more creative in how housing is delivered.

The point around scarce assets is simply to say bricks are needed to build most homes and they are scarce. It was interesting to hear Steve Morgan admit that developments are being delayed due to the shortage of not only bricks but labour. It’s like the housing gods are against us – limited land, no labour, no bricks and a planning system that is failing.

Bricks don’t grow on trees but the sudden rush for them is causing problems. Simple answer is we need more but that won’t happen overnight. Labour is our own creation, we simply stopped training people in the downturn and therefore it will take time to train them – it is fixable but needs time. Land will always be limited, use it wisely people. Planning is surely a key battle ground in the election so this should be improved, but not fixed, in the medium future.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Pay the price to live somewhere nice

As we approach the end of October, thoughts turn to what the future might hold for UK property prices. With signs that the housing market may be slowing down what will 2015 bring? In my view over the next five years we will continue to see growth, although more subdued than in recent times. For 2015 I predict minor growth of 2.9% reflecting a cooling in London with the regions surging onwards. Sadly I won’t know if I’m right for over a year.

The property market is at a turning point. The direction of the market has largely been marching upwards — until recently. Average house prices fell back from a record high in September with the first month-on-month fall in well over a year, the latest Nationwide building society report says.
Reading through the latest Residential Market Survey from RICS it was clear that greater caution was being exercised as house price momentum slowed. It said nationally, new buyer demand slipped for the third consecutive month and in London, caution took a particular toll, with prospective new buyer demand seeing its fifth consecutive monthly decline — a trend not seen since April 2012. Sound the alarm? I think not!

Interest rates are still at their historic low (though surely the MPC will introduce a small rise in the coming months) and long term price expectations remain positive – tag on to these the fact that more houses should be coming to market all makes for nice reading. Though the flip side is that rising house prices, stagnant wages and the increasing cost of living are all adding pressure to the ability of individuals and families to buy homes.

All this talk of property values did make me think how much house I would get for the equivalent price I paid in other regions. In some areas a hell of a lot more but some areas we’d be living in some tight square footage.

I live near Peak District, moving 5 miles closer reduces the number of bedrooms in my house by two and moving 5 miles away pretty much means a mansion for me. Thank god I like and can afford Penistone. A word of warning would be that you find a house price and location that work for you.

It is no secret that people pay more for the location as the below shows:

The added value is purely a location premium. If you take the Peak District, although many villages are idyllic they simply don’t cater well for residents – increased traffic from tourists, lack of investment in road infrastructure, tourists catered for more than residents and so forth. So just think is a beautiful view really the be all and end all as if it’s not you may save a pretty penny.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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A new approach to delivering houses

It was great to read that Manchester City Council (“MCC”) had taken a different slant on funding to set about their ambitions. It is no surprise that the residential market in the North West is having an impact on the regional economy, with housing shortages across the region. A conversation with a housing developer only three weeks ago identified that only about 60% of houses needed in the area are being built – quite a short fall.

So the plan by MCC is to build 6,000 new homes by 2024 and to kick start this investment they are teaming up with Sheikh Mansour in a joint venture and already 830 homes have been announced. Now the partner is no surprise and some of the redevelopment fits well with the overall development work undertaken in the city. Which begs the question, it’s a nice idea but could it be replicated elsewhere in the regions? For me it won’t do except for certain areas as the challenge will always be finding that joint venture partner. A partner needs something that really does benefit them – why not partner with a commercial developer, by completing the residential development it could unlock future potential from a commercial angle.

It is fairly unanimous that the private sector doesn’t deliver enough housing. But it’s not their fault, they have shareholders to answer to, imagine having to tell them that you’d lost their money but don’t worry there is no longer housing issues, unlikely! So partnering with a Sheikh may be ambitious for all and pushing the private won’t work – so why not partner with say the Homes and Communities Agency (as MCC has already!) or a more wide spread multi party joint venture to share the risk and benefit.

It all comes full swing with the panic in the political parties about housing and they certainly are all scrambling to outline their plans, none of which ultimately convince me but they are a huge step forward. For the Conservatives, it is a focus on extending “help to buy” and tax exemptions for discounted houses to certain individuals. They sound better than Mansion Taxes and forced development (surely you have a land bank for the very description, a bank of land for the future. So I leave you with two questions – which proposed plans make you jump with excitement and which makes you weep in the corner?

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend which is nearly with us,

Lee

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Houses prices increase yet most of the country is still below 2007/8 peak

At the weekend I took a few years off my life and spend a day with long-time friends reflecting on the past, the present and the future. It is strange to believe that a group of 31 year olds have had such mixed fortune in the housing market, despite living within the same three mile radius. Though what stuck out most for me were the grandparents paying £65 per month rent for a two bedroom.
Is renting the future (at those prices hell yes!)? I have often wondered while frequenting Switzerland, Germany and France about the idea of solely renting, but then how would I ever retire, how do they retire abroad? But from discussing with locals it is simple – there system works, rents are better compared to salaries and other benefits provide for a comfortable retirement.

Now next year there’s an election. The “Mansion Tax” has provided me a few chuckles – can’t ever see it coming to fruition and if it does I may be departing the country. Now it’s the Conservatives turn, the talk around a “Rent to Buy” scheme to help affluent young workers. On paper – 20% reduction in market rates for seven years and first refusal to buy. It works doesn’t it? Well sort of, these young workers earn £33,000 each so it is helping but it’s selective helping. Feel sorry for the poor sole earning £34,000.

So it’s a start but there has to be radical reform and initiatives to reshape the housing marking and I cannot understand timidity of politicians of all persuasions in tackling the problem. It is obvious that supply has to be increased dramatically and if we can bail out banks with QE why not something similar to finance housing. The added benefit is the spur to growth and employment that it would provide.

We are now seven years on from the last peak in house prices, annual price inflation is once again approaching 10%. London is the driving force but the focus should be on the 72% of the 3,000 postcode areas which are still below their peak levels. So what is driving house price growth – well the most obvious is investor demand (both internationally and local) which is predominantly hitting London but spreading. The second driver is affluent people who have access to finance, want to upgrade and simply can in this market. Does this all point towards a house bubble – well no, think about – new mortgage checks, more cautious bankers and I would also say still a buyers’ market are all helping keep it at bay. But let’s all keep an eye out to make sure I’m right!

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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Million dollar question – how do you build more houses?

So in the week after Scotland said “No” Labour descended on Manchester. I suppose planning a party conference in Edinburgh would have been risky. Now I’m not usually one to pay much attention to a conference but talk of New Homes Corporations (“NHCs”) did get me thinking.

So just to recap that the current problem is that not enough houses are being built so the solution of Labour is to build more, in fact 200,000 per annum by 2020 but with Savills forecasting that 167,000 new homes will be built per annum by 2018 it doesn’t feel like much of an increase.

I do admit though NHCs sound intriguing, though typically details seemed a bit sketchy. NHCs will work with both private and public sector bodies to build more houses, even letting little old SMEs help. About time the little man was involved. The powers the NHCs are expected to be given would ultimately aim to speed up the process so it could work but there are a lot of variables – the big one being Labour getting in power.

So general election aside, what can be done right now? The questions is how can you increase house building in the UK? A quick whip round the pub last night with friends listed stamp duty, more power and incentives as being key but let’s remember the current housing shortage will only continue to push prices up. Are these three ideas simply not far enough.

The Estates Gazette did a much more formal study than my pub attempt and came up with eight options. Two that made me think were (i) making more land available and (ii) improving funding for SME builders. So land, it’s precious but let’s not go mad. I live in a small village and a large new housing estate would significantly change the dynamic of the village unless the local authority had the money to build a new school, improve infrastructure or tempt retailers in. So that won’t work as a larger house builder is unlikely to see pound signs in building say 10 houses; however a SME builder could do it but they can’t get the financing so we’re onto (ii).

Recent discussions with a number of banks, and as I’ve previously mentioned, highlights that they won’t fund SMEs to the same extent as established players. It’s just too risky as they offer less security. Crazy idea, why doesn’t the government help – maybe the NHCs will, time will tell.

So over the next few months leading up to May 2015 we will hear more and more about how each party will resolve this growing issue but please do share your views.

Free feel to contact me 0113 288 2276 or drop me an email if you wish to discuss this blog or anything relevant to property and construction.

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Lee

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Fighting corruption and bribery in the construction industry

Everyone talks about, most admit that it exists but isn’t an issue and others simply have learned to live with the issue – economic crime is growing in the construction industry.

Well you simply cannot open a newspaper without hearing the word – “fraud”, it has become less taboo to admit to it and we certainly are sharing more about it. In a recent PwC survey 33% of respondents admitted to having suffered an economic crime (2009: 24%). Now you may think this figure is low, but consider that the construction industry is dominated by less regulated entities, where reporting matters is more stringent, and privately owned businesses means it is actually fairly high compared to other industries. Surprised? I’m not.

The key headlines from the survey are below:

·         49% of those reporting economic crime say it includes bribery and corruption. That’s the highest level of any industry;

·         Asset misappropriation tops the list of economic crime with 76% experiencing;

·         Insiders committed 70% of the most serious economic crimes.

Now be honest, do any of these facts surprise you? The nature of the industry means that bribery and corruption would be a fairly high percentage of reported crime (though I’m not condoning it). Asset misappropriation with sites containing large quantities of material often with little control/security in place to protect it, could be higher in certain situations. The below infographic demonstrates the results:

So compared to the overall sample, the construction industry has a higher than average type of fraud across the board with the exception of cybercrime; however the industry has lower than average levels of data to be stolen.

It may surprise people that the construction industry has the highest rate of bribery and corruption but think more widely than this risk. A business that is susceptible to bribery will undoubtedly have more underlying issues, for example accounting for the bribe will be interesting.

But despite all this should the construction industry simply accept that these risks are present? Are material losses just part of doing business? Think of it a different way, you may not be losing materials but even worse accepting materials that are inferior which can then impact reputation.

So where to next with standard operating processes in the industry outdated and therefore susceptible to manipulation, is it hopeless? Well think about these:

·         Implemented a policy in respect of bribery and incorporate into staff training.

·         Perform additional due diligence on projects, for example inspecting quality not simply quantity of materials.

·         Implement an internal audit function or if too costly an independent (not necessarily external) review.

Yes the industry is susceptible but that doesn’t mean we should accept it, many in the sector are fighting back and this is certainly something every business should consider.

Free feel to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.
Enjoy the weekend,

Lee

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Grant the planning and they will build

I write this off the back of an interesting week with a number of meetings with local intermediaries and businesses in the property and construction sector (oh and that small referendum, incase you was unaware). Last week I had a little rant about the housing sector and the need to increase residential developments but also the implications of current interest rates and rising house prices.

And while we think about rising house prices locally spare a thought for those in the Dubai or Croatia market (courtesy of RICS).

Now the more that I research the topic the more confusing it becomes. Savills have forecast that c.167,000 new homes will be built per annum by 2018 which is a significant rise to current levels, but the problem surely is that are the authorities granting planning permissions to meet this demand? I think not, so it doesn’t stack up – surely somewhere it needs to change but more importantly how can support be provided to SMEs to help them.

To me the country has a housing crisis and the key for the next election is to clearly set out policies that help it i.e. reform the planning system. In 2013, around 109,000 houses were completed against planning permissions of around 170,000. Great, what a margin; however there is a backlog and when you look at this in terms of number of developments it soon is gloom rather than smiles.

One area that could be tackled is supporting SMEs further. It is great having Help to Buy and Builders Finance Fund but if they don’t have the capital to help them acquire the sites to take into planning then it relies on the larger players to deliver. Banks need to factor the risk and address security before lending so someone else needs to jump in – any volunteers?

But it’s not all about housing developments. There is more to feel optimistic about as speculative developments are commencing across Yorkshire, and why not the market is growing and money is becoming available – or is it? It depends who you speak to and maybe this reflects the more controlled manner in which funding is now provided by banks.

Looking at Leeds, Muse Developments has received planning approval for LOGIC Leeds with construction expected to commence in November and completion next summer. I can then look down from the window by my desk and admire the MEPC development, again the next building being developed speculatively. I can’t help but smile that after going on 6 years of down beat conversations we whole sector is shaking itself off and moving forward, just in a more controlled way. This view was replicated after meetings with two banks and a law firm this week.

This new found optimism is further supported by a recent survey by Irwin Mitchell highlighting that two thirds of construction firms in Yorkshire are more optimistic about the future than they were 12 months ago. This is great to hear, and certainly replicated by my client base, though the industry is still running from a lower cost base than perhaps at the start of the recession and therefore the risk now is that as costs rise, particularly labour, will these businesses be able to compete and grow – let’s hope so.

The challenge now is maintaining this positivity. As a result of the last few years people have developed a sense of caution, which is good to an extent, which prevents some people really shouting about the growth in the market. If we all learnt anything from the last few years, it is that the market place has risks and the lessons we learnt should play a large part in how businesses proceed. Take advantage of the opportunities but make sure the house keeping is dealt with effectively.

Next week is the Insider Yorkshire Property Awards and I have the pleasure of attending. This seems a perfect opportunity to really hear how the market is on the up and certainly what I will be promoting at the event while we hear about, and collectively celebrate, the success stories.

Free feel to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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So here it goes my first blog

So as I sit here wondering what to talk in my first blog only to receive a text from a good friend who is struggling to find a house. To me this is such a strange concept to literally have the deposit (ample of deposit to say the least) and mortgage ready to go but just nowhere to buy.

The housing shortage that is sweeping the nation can’t be helping the economy with people simply saving rather than pumping back into goods and services. All this saving, earning little interest, in a hope of one day being able to either join the property ladder or, as we did recently, move into a bigger property. The CBI recently noted that the undersupply of housing stock is leading to house prices soaring in areas. Yet what is being done about it? Is the simple answer just to build more houses? It certainly seems like one solution but with land prices increasing too house builders are going to pass the cost back to the consumer.

I’m no expert at how many people need houses each year but with approximately 120,000 being built per annum it just don’t feel enough – perhaps government policy should change to increase the number per annum while ensuring that affordable housing is available to help those wishing to enter the market have the opportunity. Next year we have a general election, in case you’ve missed it, and it feels that each party should have this near the top of their to-do list. Sort the housing shortage out.

But housing shortage and house prices go hand in hand – increased house prices in turn prices first time buyers more and more out of the market and with rents eating away disposable income it is simply a perpetual cycle. It’s a tough one to really solve in the short term but certainly an increase in the base rate could dampen off the growth, however the MPC don’t seem keen to move on that point just yet.

Having recently sold a property the first question that I seem to be asked is “did you get a good price” and Right Move recently announced 35% growth in visitors to their sold houses section. To me it’s a silly question; I wouldn’t sell if not for a good price. What is the UK obsession with counting the profits (or losses) on a house sale? Some people simply want their own house.

Now you can’t turn a newspaper without the housing market being talked about, the perpetual housing bubble that people fear will burst one day. Well it doesn’t feel like that will be soon, in fact with schemes such as help to buy and house builders tempting first time buyers with a number of freebies it feels like the market still has a bit of growth to come. Recent data from Knight Frank shows that prices are still below the peaks of 2007, well unless you live in London, SE, East of England or Scotland (lucky them!), yet here I sit in Yorkshire with prices still 5.4% lower than 2007.

A number of reports highlight “forecast” house price growth in the UK but the general consensus is around 8-9% in 2014 reducing to 3-4% in 2015 but continuing to marginally grow each year thereafter. The one point that excites me is that much of this growth is forecast to come to the regions, particularly those towns within reasonable commutes to London. It simply leaves me asking two questions: (i) how would you solve the housing shortage and (ii) how else, other than current schemes, can first time buyers be helped onto the property ladder.

And lastly, was quite surprising to see Phil Greer step down as MD of Shepherd Construction and Terry Hartwell as Property Director at Morrisons. It will be very interesting to see who steps up to replace both and drive the business strategy forward.

I hope you found my blog insightful. Any comments are much appreciated as I am new to this. Free feel to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend,

Lee

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