Tag Archives: landbank

Yet more taxpayers cash for housebuilders

Yet more funding for housebuilders! Whatever became of austerity, “there’s no money left” and “balancing the budget by 2020”? So is the country now awash with spare cash? Of course not. According to the national debt clock,  the UK is borrowing another £5,170 per SECOND or £1.86m an hour! The National debt is currently £1,762,340,000,000 (1.76trn), this equates to £28,291 for every person living in the UK or £48,600 for each UK taxpayer! So I find it totally incomprehensible that another £5bn is being added, to further and unnecessarily subsidise private housebuilding under the guise of increasing the number of new homes built.cropped-cropped-P1000481.jpgWe have already had the ‘The Osborne Stupidity’ – ‘Help to Buy’ fuelling house prices and housebuilders’ record profits. Now we have the ‘The May Lunacy’ ‘Help to Build’, yet more funding for housebuilders. Last week the Theresa May’s government announced two major housing initiatives; a £3bn Home Building Fund – £2bn long term funding for infrastructure and £1bn short term loan funding aimed towards enabling smaller developers enter the market. As is often the case with government announcements of supposedly “new funds” £1.2bn of the £3bn was previously announced as the Large Sites Infrastructure Fund in 2015. In addition, a new £2bn “Accelerated Construction Programme” aiming at getting new homes built more quickly on public land.

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HBF claim the number of new homes built is being under-reported by government.

After repeatedly failing to meet government housebuilding targets, the Home Builders Federation (HBF) now claim, quite amazingly, that the government’s official figures for new home completions are wrong and understate the number of new homes being built by its membership.

So just as the government looks to blame the large housebuilders for its own failed pledge to build 200,000 new homes a year, – “1 million new homes by 2020” – which was clearly never going to happen, the housebuilders’ barking Rottweiler [HBF], growls its disapproval by stating in every news outlet and construction publication within the influence of its PR machine, some nonsense about not all new home completions are being “counted” in both the official quarterly and annual figures published by the DCLG.

The HBF claims that up to 30,000 new home completions are not counted and included in the government’s official figures. The HBF blame “poor returns from local authorities and a flawed methodology” for the failing to record every new home built.

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A million new homes by 2020?

Who is the government  kidding?

On 21 September 2015, the then housing minister Brandon Lewis, stated on behalf of the government on BBC that it intends to build “a million new homes by 2020”. ie by the end of this parliament. A million new homes in a shade less than 5 years, around 200,000 a year. Big statement, big promise. Everyone will remember George Osborne’s “we are the builders” being seen wherever he could, wearing a hard hat and a hi-vis jacket.  So how is this going?Building a million new homes by 2020Well, recently released figures from the Department of Local Government and Communities (DCLG) show that just 139,030 new homes were built in the year to 30 June 2016. Whilst up 6% on the previous 12 months (131,500) and 29% higher than the low recorded to March 2013 (107,820), this latest total is still 18% below the peak in the quarter to March 2007 (168,640).

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Councils to tax house builder’s landbank to force them to build

An end to Landbanking? Councils demand the power to tax housebuilders who sit on land and block housebuilding

The Local Government Association said councils should have the power to charge big companies that sit on sites with planning approval for new homes.

The Local Government Association says Councils should be given the power to tax developers for each home yet to be completed to unlock around 475,000 units which are yet to be started. The proposal is that full council tax should apply to housebuilders sitting on development sites where new homes have been given the green light from the date planning permission expires. That would mean Britain’s large housebuilders would need to complete their sites or pay council tax on every unfinished new home within three years after gaining planning permission.

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Number of new homes built in 2014 up just 8 per cent to 118,760

The latest figures released by the Department for Communities and Local Government report the 137,000 new homes were started in 2014 – a 10% increase on the previous 12 months. The total of just 118,760 new homes completed in the 12 months to 31 December 2014 was up by 8% on 2013.

House prices Table

If ever there was proof that house builders are hoarding land and restricting supply this is it. Nearly every major plc house builder now has around five or six years’ supply of building land. Despite this their lobbyists the Home Builders Federation (HBF) are still bleating on about the planning system.

Stewart Baseley, executive chairman at the Home Builders Federation claimed that more than 100,000 extra people were now employed in house-building, providing a boost to the economy. Yet the HBF is demanding further incentives to encourage more development.
He said, “We are still way short of building the number of new homes the country needs, and that despite the government’s Help to Buy scheme, it was still too difficult for developers to get planning permission.”

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Redrow’s Steve Morgan – always moaning!

Steve MorganHardly a person to let an opportunity slip to gripe about the perceived failings of the planning process and other woes of the house building industry, Redrow’s CEO Steve Morgan, is becoming a regular whinger whenever his company release results or issue interim statements to the City.   His latest tirade this week concerned the release of greenbelt land for house building, capacity issues relating to labour and materials shortages and his perceived restrictive planning policies. 

Reasons to be cheerful?

Morgan’s company Redrow released a record set of results and doubled the dividend paid to its shareholders on the back of a 91% increase in profits to £132.6 million for the year to the end of June.  The average selling price of a Redrow home is also up 13% to £239,500 – the fifth highest of the large house builders.  The number of new homes built was also 27% higher, up 727 to 3,597. All of this thanks to the government’s Help to Buy scheme, acknowledged by Redrow and facilitating over a third of their private sales (35%). 

You would think this would make for a very happy bunny – especially when you consider that Morgan will be £3million richer as he owns 150 million shares in his company – but not apparently so. 

On brick shortages:

According to Morgan, there are just not enough bricks being made to go round. Strange, as his competitors Barratt managed to build 13,663 new homes, nearly four times more than Redrow and Taylor Wimpey also managed to get bricks for the 11,600 new homes they built last year, again over three times the number Redrow built! 

It takes around 10,000 bricks to build the average UK house.  Around 1,560 million bricks were made last year – enough for 156,000 new houses.  Nowhere near that number of houses will be built in 2014;   in fact, it would be a surprise if a total of 156,000 new homes are built this year!  So enough bricks are being made and Redrow’s competitors manage to order sufficient quantities so perhaps Morgan should be looking closer to home! 

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Britain’s incredible shrinking new homes

The reduction in size of new homes being built in the UK has not gone unnoticed! In a recent issue of MoneyWeek, Merryn Somerset-Webb writes that the new homes currently being built are among the smallest in the world at an average of just 76 square metres, that’s 818square feet! In comparison the average UK house, excluding new builds, is 95.7sqm – 26% larger than a new build home today. How Britain’s new homes compare in size with other countries.

OLYMPUS DIGITAL CAMERAMerryn thinks that the problem isn’t that the average size of British homes is too small… “it’s the way we share them out – too many older single people in the bigger homes and too many families in the smaller ones”  as she would like to see capital gains tax extended for residential property.  Merryn does however agree that Britain’s new homes are… “generally small and nasty” and stating that new homes are… “getting bigger everywhere else in Europe except here and in Sweden”

Matthew Lynn also in MoneyWeek,  acknowledges that new homes are small and getting smaller.  Stating over time, “products get better and cheaper, our TVs are a lot bigger than they used to be and mobile phones can now do more than a desktop PC could just five years ago.” whereas “housing gets more expensive and worse.  An Englishman’s home is meant to be his castle – but increasingly it is his rabbit hutch. Last month a survey by Building research & Information found half of all British houses failed to meet the minimum recommended living space requirement.”   In any other industry you care to look at, overtime prices come down and quality improves, or a bit of both.  A survey by insurer LV also shows UK new homes are shrinking down by 2sqm in the last 10 years.  

So why are new homes so small?  This is where I believe Matthew Lynn misses the point.  He claims that it is because Britain has…“a chronic shortage of new homes” because… “the government refuses to make enough land available for new homes.”   Meaning that in… “crowded city centres existing houses get divided up into smaller units, while in the suburbs as many new homes as possible get crammed into whatever land is made available.”    Matthew’s “solution” is to increase the amount of land for development as it would result in holding back price rises and… “more importantly, it will mean better quality homes as well”   More land will not result in larger new homes. It will not mean the quality of new homes gets better either.  All it will do is increase profits for house builders as development land get cheaper. This is  why house builders will never build enough new homes.  

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Housing minister Kris Hopkins, looking after house builder’s interests regarding Help to Buy

Following our articles on New Home Blog regarding house builders profiteering from the Help to Buy equity loan scheme and the government wasting taxpayer’s money advertising it on television, this letter was received from Housing Minister, Kris Hopkins, (on behalf of George Osborne) in response to the points raised.

It was 11 weeks before Mr Hopkins even responded. His statements are misleading and do not answer the arguments in our articles.

He says: “We are advertising [Help to Buy] to make as many people as possible aware of the opportunity”    

Help To Buy jpgIn response, there cannot be a single person in the UK who has not heard of Help to Buy.  In fact anyone considering buying a new home would have the scheme rammed home by house builder’s sales advisors and mortgage brokers.  There was absolutely no need to advertise Help to Buy on television,  wasting taxpayers money at a time of so-called “austerity.”  It is actually advertsing new build homes.

As for Help to Buy being an “opportunity” this is questionable, as the market is overheating.  Those buying 80% of a new home could well find that in a few years time, they have over-stretched themselves and may even suffer negative equity, especially when the scheme has enabled house builders to increase their average selling prices by around 20%!

He says:  “The Help to Buy scheme is enabling hard working families to access finance to buy a home”

What exactly is the “hard working” family that we are hearing so much about? People who work two jobs?  People who work long hours?  People who work physically hard like scaffolders and miners?  Or are they, as is probably the case, the vast majority of people who do a days work but do not actually get paid a fair wage in return  struggling in the face of higher taxation and rising  grocery, energy and fuel bills – all caused by government policy diluting the real value of our currency.  If the government truly wanted to “help” struggling “hard working” first-time buyers, why not abolish stamp duty land tax rather than subsidise house builders and hand taxpayer’s money to their shareholders?

Surprisingly,  “hard working” new home buyers from overseas can also take advantage of the UK government’s “generosity”.   There are no explicit rules or a requirement of citizenship or residency of those benefiting from loans under Help to Buy, although the schemes cannot be used for the purchase of second homes or for buy-to-let purposes. But how would anyone find out if an overseas buyer also owned a home in their own country and using the Help to Buy scheme as a way to reduce property speculation an investment costs?

He says: it gives “Certainty to house builders”

This is the same line trotted out by various plc house builder CEOs and their lobby group the  Home Builders Federation (HBF) whenever the Help to Buy scheme is called into question.  They still believe that Help to Buy can do no wrong – we’ll see!

He says: “House building has increased 23% since last year.”

This is not unexpected, given the low base starting point after the previous, low cost, credit-fuelled property bubble.   House builders are throwing up as many new homes as they can to make the most of the subsidies while they can.  Put food in front of a pig and it will eat more!

He says: given the increase in house building “It is not surprising that house builders profits have also increased.”

But not by a corresponding percentage Mr Hopkins! Most of the plc house builders have already reported increases in profits of around 50% in their most recent annual reports.  This is not even reflected for a full year of Help to Buy.  Redrow profits are up 107%,  Barratt reported profits up 162%.  In addition, house builders are all reporting increases of 14%-17% in their average selling prices, way above increases in the general market, hence the profit.  You charge more when your customers can pay less, with the taxpayer picking up the difference!   Charging more equals more profit!

He says: “Around 1200 builders have signed up to deliver this scheme, and over 90% are small to medium-sized builders.”

Whilst this may indeed be true,   what it does not reflect is the proportion  of   Help to Buy loans taken up by the largest house builders.  These typically represent on  average, around 30% of their total sales.     Based on the latest available figures from the top five house builders by volume, around 25% -30% of their buyers have used Help to Buy.  That is around 12,000 (62%) of the total 19,394 new homes sold using Help to Buy equity share to 31 March 2014, with five of the largest plc house builders accounting for over 62% of the Help to Buy loans thus far.  This could be even higher when they report accounts with the benefit of a full year of Help to Buy.  For the top ten house builders by volume, Help to Buy accounted for around 15,330 of their sales, nearly 80% of the total Help to Buy loans to just 10 house builders!   So it is misleading in the extreme to imply that small to medium sized builders are getting the most benefit.

He says: “We do not agree that help to Buy scheme is creating a bubble”

George Osborne agrees, but has been distancing himself from possible fall-out lately, saying the BoE has all the tools to prevent a house price bubble.  Obviously Mark Carney the Governor of the Bank of England disagrees as does Christine Lagarde at the IMF who urged the UK Government to rethink Help to Buy last Friday.    But hey, what do they know?   Kris says it’s all OK!

He says:  “There is no evidence of widespread land banking of land with planning permission by the major house builders”

Try looking harder!  Taylor Wimpey CEO Peter Redfern stated in a blog on his company’s website that they hve six years’ supply of land with planning permission.  As Taylor Wimpey has a land bank of around 65,400 plots and built 11,696 homes in the year to 31 December 2013, it would imply all of Taylor Wimpey’s land bank has planning permission but not all of it is being built on!  Even allowing for the 10,000 plots with “planning conditions yet to be satisfied”   Redfern alludes to the fact that his company has 30,000 plots ready to be built right now – half Taylor Wimpey’s land bank!   It is to be suspected that a similar situations exist with the other large house builders, why else was their such a outcry of whinging from builder CEO’s over Ed Miliband’s proposed land grab earlier this year?  Despite whatever Hopkin’s data from Glenigan or opinion from estate agent Savills might suggest!

So there we have it, 11 weeks to come up with a misleading response full of government spin  defending house builders profits yet failing to answer or even acknowledge any of the real issues, much as George Osborne’s did at the Treasury Select Committee meeting on 26 March 2013.

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House builders react as Ed Miliband re ignites his land grab mandate

Ed MilibandIn a speech to the party’s national policy forum, Mr Miliband is set to confirm that increasing the number of new homes built each year will be a key priority for an incoming Labour government. He will confirm measures to force house builders to stop hoarding land with his “use it or lose it” proposal. 

Other options also being considered include giving councils the power to fine companies that own large areas of undeveloped land or to require them to pay council tax or a special “land tax” on the undeveloped land in question. As a last resort house builders who refuse to build could find themselves facing a compulsory purchase order.

Mr Miliband will say: “We have to be willing to confront some of the obstacles to house-building. Across our country there are firms sitting on land waiting for it to accumulate in value and not building on it – landowners with planning permission who simply do not build. We have to change that… permission to build should mean landowners build.” 

Mr Miliband recognises that the profits of the biggest four developers by volume – Barratt, Berkeley, Persimmon and Taylor Wimpey – have risen by 557% since the coalition took office. The number of homes completed by these firms increased by just 4,067 in 2012, and the number of affordable homes built last year actually fell by 26%. 

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