The hokey cokey of politics

In, out, in, out and then shake it all about. To be honest I’m becoming a little sick of the EU referendum hokey-cokey. In true political style both sides have made a mockery of providing the voting public good honest information and instead have resorted to scare tactics and over ambitious promises. Imagine what society would be like if politicians just told the truth – that would be front page news (well apart from the Sun which would no doubt be showing us a photo of the latest hairstyle from a member of the latest boyband sensation!).

Earlier in the month politics delivered us a new Labour Mayor of London and a Scottish and Welsh government run by the SNP and Labour respectively. Irrespective of whether you think the best, worst or middle runner won at least they all have on the agenda “plans” to sort out housing. I say “plans” because until they happen I don’t particularly believe a politician.

Khan and the returned governments of Scotland and Wales have all put affordable housing at the top of their priority lists, alongside policies to boost infrastructure spending and address skills shortages in construction. Music to my ears but what are these plans and do they really stack up? The biggest challenge as I see it will be developers adapting in London to Khan, who has a very different style than Boris. Set a target that 50% of all new housing should be “genuinely affordable” to low-income earners

Khan

• “Set up a construction academy to help address the capital’s skills shortages” – yes like this idea but will need to see the detail – how and who will fund this and why is it only applying to the capital’s skills shortages – can there not be linkage to a more broader national need?
• “50% affordable housing target” – yes in an ideal world this would be magical but it needs to be sensible. I’m a small housebuilder, am I really going to develop a site knowing half is affordable? Sense would make a size limit criteria – 50% for developments over say 200 homes and ratchet down. We want to encourage affordable not terminate development.
• “Maintain the London Plan’s commitment to zero-carbon housing” – never really believed this could be done properly until I saw some houses in the North that are zero-carbon. It is possible and if London can even convert a few percentage it will make a huge difference.

Scotland

·        A promise to deliver 50,000 affordable houses with 70% being for social rent is a welcome promise and certainly aid the housing supply issues in Scotland. This coupled with further investment in Help to Buy will make the housing ladder easier for first time buyers.

Wales

·        An interesting development here with similar promises as above – 20,000 affordable homes but key being an end to landbanking for housebuilders. Look forward to seeing this in action.

The policies proposed by all are welcome and certainly benefit the respective locations. Hopefully in a few months we can all glow in the bliss that some have actually come to fruition. 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 week ahead

Lee

The failure to deliver homes continues

Another year has passed and another year where the delivery of homes last year failed to live up to long-term averages. The interesting dynamic though is the move for housebuilders to bigger units therefore offering lower density on developments.

Growth in the private housing market has increased year on year and is now significantly up on the lows of 2009 yet this is underpinned by three/four bedroom homes and an ever increasingly percentage taken up by Help to Buy – currently standing at 27%.

April 2016 saw average house price increase by a marginal 0.2% - though most did expect a decrease. The monthly rise was the lowest since November and brought the year-on-year rate of increase down to 4.9%, from 5.7% in March. In London, prices were up by 13.9% over 12 months, to an average £534,785 – five and a half times the average price of a home in the north-east, which fell by 0.7% over the year to £97,581.

The UK went through a phase around ten years ago of building more apartments than houses in major cities, nowadays this has moved to more than 80% of homes being developed being houses and more interesting that in a number of cities, like Sheffield and Hull, these houses are being built in the city centre.

The house price growth over the last few years has largely been driven by London where growth has been at 75% since 2009 driven by significant lack of demand and a strong demand from buyers wanting to move into the city. Broader into the regions has a mixed bag of results largely due to the recovery from recession taking longer but most regions are now seeing positive growth, although nowhere near the levels London has experienced.

The perfect storm though has materialised for most regions. Economic growth has largely returned to most areas in the UK coupled with mortgage rates still being relatively low, Help to Buy is supporting those first time buyers who need a hand with a deposit and then to top it off the price-to-earnings measure is broadly in line with the long-run average. Why wouldn’t people want to buy a house – let’s deep dive and take a look at five key areas:

1.     Conservatives made a pledge to build 1,000,000 homes by 2020 and they simply are behind the target. Help to Buy was introduced to encourage house builders to build – it has, look at how well house builders are doing – but it is now allowing people to buy houses they cannot afford.

2.     Starter homes are being introduced – 20% discount to market price (so basically the price they should be rather than the inflated price) – the sector that needs housing is social housing, support this. You have to wonder how the 20% reduction will be addressed – how will costs be cut to ensure some profitability on the site.

3.     Private rental sector – well what to say, reduced tax breaks, stamp duty surcharges and much more means although PRS is encouraged it is also becoming a costly business yet it was the safety net for so many providing housing solutions to those unable to buy.

4.     Planning – short and sweet – it does feel to have got slightly better but more can be done to improve efficiency and reduce red tape.

5.     The government wanted to introduce innovation into home buying – erm…still waiting. There has been improvements and I’ve met a few businesses that they themselves are making improvements not through anything the government has done though.

So to sum it up we see ourselves with a housing market that is faltering on delivery, failing completely on private rental sector, sort of helping first time buyers but could do much more and completely failed on introducing innovation into the housing market like it promised. 

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 your week

Lee