David Cameron has announced, ahead of the Conservative conference in Manchester, that the second phase of the controversial ‘Help to Buy’ scheme is to be brought forward by three months and will be available from 7th October 2013. This comes despite numerous criticisms and warnings from many top economic experts that Help to Buy will create and fuel another house price bubble.
He rejected these concerns, including those of his Business Secretary Vince Cable of the prospect of an unsustainable boom in house prices, particularly in the south-east of England. Speaking in Manchester, David Cameron said: “talk of a housing bubble to people here in Manchester or Salford, and they would literally laugh in your face”. He also claimed that the number of first time buyers is still almost half what it was before the financial crisis and the number of mortgage approvals is still well below pre credit crunch levels.
Picky Persimmon pulls plug on plots planned north of Pontardawe to Pontypridd.
House builder Persimmon, has announced it is to stop building new homes in parts of south Wales saying it does not make enough profit on developments north of Pontypridd because of lower selling prices. The company builds around 1,000 homes a year in Wales, has now confirmed that their Coed Dyffryn development in Aberdare, will be its last in the valleys
Persimmon has introduced what it refers to as a “snowline” – the point at which nothing grows because of perpetual snow and ice – running across south Wales on a level with Pontypridd. Their “snowline” is from Pontardawe to the west to Pontypool in the east. Persimmon said it has stopped buying any land in this area, because it says it cannot make sufficient profit due to the comparatively low selling price. A three-bedroom home on a development in the valleys would be priced at around £120,000 but the same house would sell for £160,000 nearer to Cardiff, Newport or Swansea.
Affordable housing is being axed as house builders maximise profits. New legislation that came into force in April, is allowing house builders to fast track challenges to councils against section 106 agreements, provided they can show the provision of low-cost housing would affect the financial viability of their projects, making them uneconomical.
Many councils across the UK are giving in to house builders who are refusing to start building projects unless they deliver a healthy profit. In some of Britain’s biggest cities house builders and councils have torn up previously binding legal agreements to build affordable housing; which includes social, rented and shared ownership for specified eligible households that cannot afford to buy or rent on the open market.
A three-month investigation by Society Guardian has discovered that 60% of the largest housing developments currently in the planning system are falling short of affordable housing targets, meaning thousands of cheaper homes may never be built. The study revealed that not one of Birminghams’s largest housing developments meet its 35% affordable housing target.
It started with house builders using shared driveways, a way to cram even more homes onto a development. Now there is a growing trend towards privately owned estate roads on new home developments. House builders are claiming this move is being driven by the local authority’s refusal at the planning stage, to adopt estate roads under a section 38 agreement, presumably to avoid future maintenance costs to the council taxpayer.
However, the move to privately owned road access means that many new home owners are unwittingly signing up to years of ongoing management charges and contributions to a sinking fund to cover future maintenance and repairs.
Persimmon Homes buyers Mr and Mrs D Barlow of Harleston in Norfolk moved into their new home in November 2012 and began to notice problems “within hours.” Having written a letter to the Daily Mail to warn others they said:
“Persimmon has reported record profits, might some of this have been achieved by reducing the quality of their buildings” “The clean-up after construction left a lot to be desired. The paintwork had been damaged, the front door didn’t fit and an upstairs window had a gap so large you get your fingers in it.”
The Home Builders Federation, the body that says it is “the voice of the home building industry, representing member interests on a national and regional level” is moaning yet again, about the planning system ‘delaying’ the delivery of new homes.
Surely house builders should put their begging bowls away!
The latest whinge is regarding the conditions that are attached to planning approvals. The HBF claim, that Local Authorities are threatening to choke of the recovery in house building with red tape, with the more onerous conditions causing costly delays, sometimes of a year or more.
Galliford report record profits and Crest report sales up 92% thanks to Help to Buy.
It is clear that the ‘Help to Buy’ scheme continues to help house builders as both Galliford Try and Crest Nicholson are clearly benefiting, judging by their recently released company statements.
Record profits at Galliford Try:
In their year-end results to 30 June 2013, CEO Greg Fitzgerald reported a record group profits of £74.1million up 17% on last year “were driven primarily by an improved margin in housebuilding reflecting the strong performance of our house building division”. This was despite 107 fewer homes being built in the year and a modest £3million rise in revenues from house building.
Andrew Richards, appointed in July 2013 as Managing Director of Housebuilding (Linden Homes) acknowledged the contribution that Help to Buy has made saying “we had previously only promoted shared-equity schemes for sites where houses were harder to sell, so as not to tie up our capital. Help to Buy requires no capital from us, making it suitable for all our developments. We have seen a marked uplift in reservations since 1 April, with around 31% of buyers using Help to Buy.” As a result the average selling price is up 5% to £262,000.
Crest Nicholson report forward sales up 92%
Steve Morgan CEO of house builder Redrow has dismissed the view that current government mortgage schemes were fuelling the housing boom saying that UK’s “bureaucratic mess” of an “antiquated planning system” was the main cause of the housing shortage.
The government has been criticised by economists and industry players for its launch of the ‘Help to Buy’ scheme in March, the first part of which provides shared equity loans to help people to buy a new home with a deposit of just 5%. “I’ve seen some pretty silly things written in the last week or two and stated by certain politicians,” said chief execultive Steve Morgan recently, careful to avoid naming anyone in particular. “The real issue is not whether Help to Buy is fuelling a new boom, the real issue is that we’re not building enough houses, and we’re not building enough houses because we’ve got an antiquated planning system.”
Bricklayers’ pay has surged 20% in the past six months as housebuilders struggle to keep up with a surge in demand for homes created by the Government’s ‘Help to Buy’ scheme. Greg Fitzgerald, chief executive of house builder Galliford Try said, “I have evidence of us paying bricklayers 20% more than six to nine months ago. Pretty much, since Help to Buy on April 1, we have gone from an environment where if you made a mistake on a job and needed twice as many brickies you would just go and pick them up to a completely different ball game. We can see build inflation starting to come through for the first time in four or five years.”
The current trade shortfall comes after many workers left the building industry during the recession as fewer homes were being built. House builders also slashed prices they paid to building workers by a third, virtually overnight, as the financial crisis hit.
The larger listed house builders have reported accelerated demand for their new homes, with sales, reservations and profit considerably higher so far this year. First half forward reservations are up an average 36% on the same period last year with average revenues and profits are up 13% and 40% respectively.
Help to Buy has without doubt significantly contributed to the increase in reservations since it was introduced in April, with around 12,500 homes reserved as a result of the scheme, accounting for around a quarter of each house builder’s sales so far this year.
Barratt CEO Mark Clare said recently: “We have had people coming at 4am for a 9am start and have many examples where our sales teams have arrived to find a dozen or so people waiting. We are starting to see queues, which is not something we have seen for years. And we are also seeing people buying off plan, which we have not seen for five or six years.”