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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