Sunday morning thoughts and reflections

On a gloomy Sunday morning what better things to do than reflect on the world! This week we have commenced reviewing the submissions to the Yorkshire Residential Property Awards and I’ll you if people say residential developments are boring they should read some of these – certainly some high quality submissions but I’ll say no more and you’ll have to wait until the winners are announced in October. We have also been asked to host an event for women in construction – it makes me think to previous events we have hosted ourselves in the sector and to be honest you struggle to think of women in senior positions in construction. In this day and age that can’t be right but I guess is there the role models to make women want to enter what has historically been a male dominated sector.

Construction industry leaders from across the sector have urged employers to do more to promote and encourage women into the industry and into leadership positions. The challenge I see is that is their currently sufficient reinforcement of success and engagement in the industry for women. I have worked with a number of women in the industry who are more than capable of doing the role they do and they do it with significant success but is there the profile around it? Given there is research showing women produced three times better returns than men in listed businesses makes you think why would you not want to encourage more women into the industry.  The industry needs to take ownership of this and drive it continually forward.

But there is even more to think about in the industry which seems to have enough issues to keep an army busy for years! Firstly I am surprised by the attack David Cameron has started on overseas money. Yes he means well – we need to be more transparent but let’s be honest most overseas money coming into the UK is from reputable sources and is helping fund the likes of PRS – which in turn helps on the housing crisis. It resonates strongly with me due to a charity I am involved in that this negativity does nothing but damage reputations of good honest people. The message is clear from Mr Cameron “we need to stop foreigners owning so much London property and inflating prices to the point honest British folk can’t afford to live there” well I do disagree strongly for the points raised above.

And from blue to another with Boris Johnson drawing up plans for fixed targets of around 25% for affordable homes on major sites in London in a move aimed at speeding up development in the capital. The problem though is that 25% is below the 35% to 50% targets for affordable homes adopted by London boroughs. So why would we take a step back? The simple fact is in London to get on the housing ladder takes either luck, family support and a lot of saving so affordable homes are needed. The flip side though is that some schemes are likely to be unviable with more than 10 – 15% affordable homes – so does this target not only move things in a worse direction to what is already adopted but could also make some schemes redundant – much need homes redundant.

 

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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Good and bad news for the construction sector

There is a good feeling about returning to work feeling refreshed after a few weeks off work but sadly the feelings around the construction and housing sector aren’t. After spending a week enjoying the sights and amazing buildings in Northumberland and Scottish Borders it is regrettable to hear that the construction adviser role has been axed by the business minister Sajid Javid – which ultimately raised concerns about the delivery of Construction 2025.



The Construction 2025 includes four specific targets, a 33% reduction in the cost of construction, a 50% cut in greenhouse gas emissions in the built environment, a 50% cut in the time taken to build, and a 50% cut in the trade gap that exists between construction exports and imports. But now I am concerned that given the leadership council has been reduced from 30 to 12 and the adviser role axed that delivering this is unlikely. This is summed up effectively by Graham Watts, chief executive the Construction Industry Council, said: “The future of Construction 2025 now is ambiguous, and I think it’s likely the specifics will be buried. There will be new targets and new objectives - essentially they’ll move on. The industry needs some clarity on this as soon as possible.”



It hasn’t all been bad news after it was revealed there could be twice as much brownfield land in England and Wales than official government figures have suggested, raising the prospect that many more homes than expected could be built on former industrial sites. To me brownfield land is a useful resource to help deliver the homes needed for the country but there is still the issue that planning is too complicated and time consuming.

But the second piece of good news was the plans to grant automatic permission, in principle, for homes on brownfield sites that are identified in a new statutory register of brownfield land. This effectively gives automatic planning permission – sounds good but also extremely dangerous and surely there needs to be some element of checking a development before letting a developer go full steam ahead. So it is welcome news but more details are needed.

There is a need for land to become available quicker and therefore I am all for the changes to the permission process but I still think there needs to be an element of checking otherwise you run the risk of people taking advantage. These plans should help unlock areas that need redevelopment but remember these sites are usually contaminated land or need significant infrastructure investment and this needs careful management to ensure it is fit for purpose. It’s all a good move and things are in the right direction but let’s just be sensible about what developments we simply rubber stamp.

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

What can be done about housing?

It is no surprise that at the beginning of tenure is the best time to make changes and the government has the opportunity to really do something about housing. The manifesto and discussions since have made it clear housing is on the agenda but without the housing bill we lack the full detail. Brandon Lewis, having been reappointed, does give some stability to the industry but even more need for a quick action plan.

So where should the top team be focusing its efforts? With the introduction of the NPPF and the economic recovery, the level of outline consents granted is already running at around 240,000 homes per year, nearly double the actual number of homes being completed. However, the challenge is turning the outline consents into actual homes. Surely this can only be addressed with wholesale changes to the complex planning system.

The government can tackle certain areas that will help housebuilders deliver more but they will need to take bolder steps on housing delivery, such as re-appraising parts of the green belt. Any changes to the green belt will be unpopular but why can’t England follow the approach taken north of the border where green belts are reviewed every time the local plan is reviewed. Yes let’s focus on redeveloping brownfield but we can sensibly look at green belt.



On social housing we heard a pledge of 275,000 homes over five years which is better than a kick in the teeth but given the tight constraints on funds will there be sufficient funding and while you are building the “right-to-buy” scheme means housing association stock could reduce with tenants taking advantage of low mortgage rates. On top of social housing, a further 200,000 starter homes for which there is little more detail.



Radical changes are needed. We seem to live in a society where the middle class have been priced out of the market – how can it be right that those on the dole get more? The introduction of a national housing target (rather than simply talking about it), and draw up an implementation plan to meet it. What is this number? Well widely believed that 200,000 is a good starter per annum. One that is opportunistic for all walks of life – SMEs, national housebuilders and housing associations. Draw on industry experience and public sector to ensure the plan benefits everyone and focuses on the community and please promote the housing minister to the cabinet and make them accountable.

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

The housing crisis that the government faces

Another day another budget and it certainly was a busy one. As an individual there was some good news and some bad news but the listed housebuilders were in for a hit with up to 7% wiped off share prices on the back of news that tax relief on mortgage payments is to be restricted to the basic rate of tax for those buying to let. It’s like full circle given the share jump they received following the Conservatives forming a government.


This recent fall does come off the back of Mr Osbourne committing £6bn to Help to Buy until at least 2020. The first chunk of £1.5bn has been delivered to the Homes and Communities Agency and is ready to roll. The scheme that gives equity loans to help individuals get on the property ladder is boosting the economy by driving house building. The key point I see is that by committing to 2020 you provide the certainty to housebuilders to recruit which benefits their own supply chain too.


But while housebuilders’ share prices have risen sharply on the election result, the Conservative Party manifesto contained no pledge to meet rising demand by setting a target to build more homes, as called for by many in the sector and this is still the case – unless it is addressed in the Housing Bill.


Certainly there is little doubt about the scale of the housing crisis that the government faces. The latest housing supply projections show that 210,000 new homes are required across England each year to cope with the number of new households forming every year. Once the accumulated backlog of past undersupply is factored in, housing pressure groups agree that the UK needs at least a quarter of a million new homes each year. Just 141,000 were built in 2013/14.


Against this backdrop, many people are putting off setting up home altogether. Figures published by the Office for National Statistics earlier this year showed that nearly a third of a million households contain more than one family.


Among young adults, nearly half of whom live in private rented accommodation, the proportion of 20 to 45 year olds putting money aside for a home deposit was down by 6% to 43% last year, according to a survey published last month by the Halifax bank. Home ownership is at its lowest level since 1985, according to recently published Department for Communities and Local Government figures.


So what do we need well its simple (I think):

• National housing target;
• Housing minister to report on progress on nationally significant sites and against the housing target; and
• More funding for social housing

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

What could the Summer Budget bring

Next week brings us the Summer Budget in unlikely to bring much for housing with the housing bill coming in due course. We already know this will extend the right to buy scheme and push for regeneration of brownfield sites. One item that would be good to see a change on is the promise the government gave to build 200,000 starter homes.

 

The target set by the government is to help achieve the “affordable” element of their target but with current house prices there is an argument that even at a 20% discount they would be anything but affordable for those who actually need housing.

 

The National Housing Federation suggests 245,000 homes a year need to be created with around 80,000 affordable. I think you could go a long way to helping this by devolving an element of releasing the land to create these opportunities to the local authorities.

 

Last month the Communities Secretary Greg Clark announced a target to release public land to create 150,000 new homes over the course of the parliament. The sites are yet to be identified though the Homes and Communities Agency has identified sites for 14,000 homes (just shy of 10%) already. This challenge is being place on central government but also local government using the 326 town halls in the country.

 

Where you would like to see this going is the release of brownfield sites for development and allow for redevelopment of some areas of inner city. A good starting point is to create a register for these brownfield sites that are suitable for housing development. In a portfolio held by government of in excess of £100bn of land and property assets it should be straightforward to identify 150,000 houses in 5 years.

 

Another big area at the moment is the investment in infrastructure which will ultimately lead to a conversion on creating a northern powerhouse.  There is a need to rebalance the economy with the country so dependent on London and the South East and a key route to aiding this is investment in infrastructure. The recent announcements that there were problems with the investment programme for Network Rail puts surely some doubt into HS3.  It won’t be a surprise if there are announcements for some early investigation work on HS3 but having lived in the region for a while we must not forget that it’s not all about rail – simple improvements to Trans-Pennine road routes, for example making use of tunnels already present, would aid connectivity.

 

From speaking to a number of individuals there is a strong belief that the best way would be to HS1 and HS3 are completed and then at some point HS2 is completed. The cost to benefit ratio for HS2 is still unclear and the timescale to me almost means it will be redundant before it commences.

 

So whatever the Summer Budgets I don’t think it will answer all our queries but rather raise more. In all the right places all the right talk is happening but actions speak louder than words.

 

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

Housing needs planning reform and a minister

The General Election feels a blur in the past yet only really six weeks ago. Throughout the campaigning there was a lot of talk about housing and coinciding with that there was a need to reform the planning system to make housing easier to deliver. This however was not high on the agenda with much focus on the need to build 200,000 new homes in one shape or another. But is the need to reform pushing higher up the agenda now whether the political system likes it or not.

 

Over recent weeks however there have been a number of points made which potentially mean we are unlikely to see much change. Greg Clark, Secretary of State for Communities, is now running the show and has called in his first planning application already for King’s College’s plans to revamp its campus on the Strand ultimately meaning delay to this scheme. This is following Danny Finkelstein signalling a period of stability in planning. Makes no sense to me, the people who use the system say it is failing, politicians seem to think it is failing yet no changes are planned despite a clear vision by everyone to increase housing. I can think of two examples of schemes that on paper should be a sure win for development yet they have stalled at planning with no light at the end of the tunnel to kick off.

 

So is it me or do politicians not realise that to increase house supply you have to speed up planning – they go hand in hand. The lack of supply is adding to the cost of buying a new home – one big circle that if more houses aren’t built the cost of those around increases. This problem is clear in London where lower-earning employees are being priced out of the market but this is also spreading to the regions.

 

The UK’s housing problem is just that, a problem. Does the industry think the conservatives will deliver the 200,000 start homes by 2020? I think the vast majority don’t unless things change. There seems to me to be three options of who should lead the provision of starter homes with central and local government being at the top of the list followed closely by housing associations.

 

There is a clear decision needed on should PRS be increased. We have seen so much institutional investment in PRS over recent times (mostly in London) but is it the way forward? Europe is more of a renting nation than the UK which historically has been a home owner’s nation. As a home owner I like the fact that I can come back from work to my own home and build a future there. That’s me and I’m not saying it is for everyone but the current government policy would be inclined towards home ownership, for example right to buy scheme.

 

So where next – well the UK needs a housing minister. It has been way too long since we did but for people to really think housing is high on the agenda then there needs to be someone in the Houses of Parliament shouting for housing reform. Secondly a clear plan of attack for achieving the housing targets, I’m not 100% sure about Tony Pidgleys plan to restructure the greenbelt but he does raise valid points that greenbelt has to been green – if it isn’t then why is it protected.

 

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

Construction on the up

It’s a busy weekend ahead as the annual Penistone Gala is on (tickets still available if you want some comedy, real ale, music and homemade treats in your life but having spent a lot of time of trains this week I’ve had time to reflect on a few points.

The CPA noted recently that construction has grown for the eighth straight quarter in Q1 2015 and I’m not surprised – I’ve done London, Leeds, Sheffield, Edinburgh and even Penistone this week and they all have construction projects ongoing whether it’s commercial, industrial or residential. The market is very actively and in a good way. Lots of sensible decisions being taken but at the same time some sensible risk around speculative builds (though in truth some of this is purely because a tenant is on the cusp of signing up!).

The good news is that this upbeat mentality and growth is coming across all parts of the sector – large contractors, civil engineers and even SMEs and although yes there has been some causalities along the way we are moving into a good place with 50% of building contractors reporting growth.

A key area for this growth is the housing sector – it’s everywhere and even there we still are not building enough, but we are heading the right way.

The flipside is with growth comes additional costs with labour costs increasing – a combination of catching up on a few years of no growth but also reflecting skills shortage putting the power into the labours’ hands. Similar increases are occurring in material costs. The challenge for the industry is offsetting these costs increases by passing to the ultimate consumer. Not easy! A number of businesses are looking to technology and partnerships to keep the business growing but in a safe place risk wise.



An example recently is the acquisition of Shepherds construction business by Wates Group. The deal works well for Wates in their ambition to grow the business and the culture fit will work given both businesses are family-owned with similar values. Provided integration of the two is well planned and coordinated then there is potential here for Wates to grow significantly in the North but also use the additional resource to support the South.



It was no secret that Shepherd Group was reviewing the entire business and following the homes business being sold it was no surprise to see construction go next having struggled over recent years to complete with the large contractors. It does allow Shepherd to focus on its other offerings which generate good returns.



The challenge during the all-important tender process is a long term view. You can drive growth by keep fees low but it will come at a cost that you are unable to meet the demands of your labour. There needs to be a balance between keeping internal and external stakeholders happy. The Wates example shows some consolidation in the industry and this is expected to continue as businesses battle for growth – the question is who is next?

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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