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.

Enjoy the weekend,

Lee

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