Posts with tag: house building uk

Land is the Key to Affordable Homes

Published On: June 9, 2015 at 4:54 pm

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Land is the key to building affordable homes, explains housing market expert Neal Hudson in research for Savills.

He says: “Land is the fundamental ingredient in the construction of new homes. Many of the issues limiting the rate of new home building can be traced back to the pricing and availability of land for residential development.”1

The current housing crisis stems from land being very expensive. This makes it hard for developers to build genuinely affordable homes. More land needs to be made available in areas that

Land is the Key to Affordable Homes

Land is the Key to Affordable Homes

people want to live in, such as the South East.

A study in the Financial Times states: “House building does not drive down prices.”1

But it is more so the way that homes are built that is the problem. The business model used for building homes means that the country cannot produce affordable properties even if more land is made available.

Developers buy land competitively years before they begin building. They pay the highest price possible to outbid rivals and therefore charge premium prices for the homes that have been built at the lowest possible cost. Homes are consequently smaller and lower quality.

Additionally, developers only build and release new homes onto the market at a rate that does not affect maximum sales price. Commonly, they sell one home a week per office to avoid discounting the price. This means that the Financial Times is right – the business model is designed to maintain prices, not bring them down.

This is hardly the developers’ fault; they are simply adopting the best strategy for business in a broken housing market. If any developer did something different, they would go out of business.

But other Northern European countries build faster, creating more affordable and larger homes. Active land planning is used to bring land to the market at reasonable prices. These policies allow multiple developers to build better.

The Netherlands positions a plot of land on a city boundary and specifies what can be built there to multiple builders. The land price is then frozen and all prospective developers are aware of the cost.

This changes the competition from bidding on land to building the best quality homes that will sell to customers. The market is not failing in these countries, but is more for homes, not land.

In Germany and Holland there is a prosperous house building industry that provides some of the top quality new homes in the world.

If the UK’s house building is to be reformed, it should be based on two basic principles:

  • Policies are needed for making more land available for homes in the right locations.
  • Policies are required for changing the broken development model to allow faster, higher quality building.

 

 

Just 43 Homes in London are Affordable for First Time Buyers

Published On: May 1, 2015 at 3:36 pm

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Categories: Property News

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The shocking fact that only 43 properties in London are affordable for first time buyers defines the housing crisis. But who is to blame for this?

Housing charity Shelter released a study this week that found just 43 homes in Greater London are still affordable for the average first time buyer.1 They analysed the salaries of people in different regions, found out how much the banks would lend them, and compared these numbers to the cost of a family home.

In areas such as the North East only 42% of homes are affordable, which is worrying in itself.

Just 43 Homes in London are Affordable for First Time Buyers

Just 43 Homes in London are Affordable for First Time Buyers

But when you look at London, the findings are appalling. Only 0.1% of properties with two or more bedrooms are affordable for the average first time buyer. If you are a Londoner who doesn’t own a home, and doesn’t have parents who will give you £30,000, then buying a home is not a likely option.

The reasons for this are clear. London does not have enough homes. The amount of people living in the capital has risen by almost a fifth in only 15 years. The number of homes has not. Therefore, prices have soared.

Many people have blamed property developers who are supposed to be doing the building. They fight to get out of obligations to include affordable housing in the huge blocks they do build. But the term affordable housing has been given a new meaning; now, it can mean up to £2,800 per month.

However, it’s the Government who sets the rules for the developers. The new affordability definition was handed to the developers and means up to 80% of market rents.

Developers also have to react to Government policy in other ways. The price of homes correlates to the price of land in the areas people might want to live. The property price boom means that houses can be sold at higher prices, but the developers need to pay more for the land to put new homes on.

This is why building in London is so difficult. For those that do build, huge amounts are apartments in skyscrapers. Unless something happens to make building in the capital less expensive, developers won’t be interested in the measly profits.

If the developers aren’t to blame, could it be the Government’s fault? Going back decades, the Government has made it more difficult for councils to build, introduced limiting planning rules and excused developers.

Some are arguing that if the private sector isn’t creating enough homes, then the state should be. Some people believe the only way out of the crisis is for the Government to fund a large building programme. But none of the political parties have proposed this in their election manifestos.

Could it even be down to the public? With campaigns against skyscrapers, less are built. With protests against freeing London’s greenbelt, less is made available, despite there being more land in Surrey offered to golf courses than housing.

Buyers want prices to come down, but don’t realise what must happen to make that possible. Homeowners don’t even want values to fall. So what can politicians do?

1 http://www.theguardian.com/commentisfree/2015/apr/30/housing-crisis-first-time-buyer-affordable-homes-london

 

 

 

 

Where is the Most Expensive Place to Buy a Home in the UK?

Published On: May 1, 2015 at 2:45 pm

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New research has found that Kensington and Chelsea is the most expensive place to buy a property in the UK.

In the London borough, one square metre will cost buyers up to £10,854. The same amount of space in the cheapest place to buy in Britain, Stanley, County Durham, is just £818. This emphasises the wide price gap around the country.

Using Halifax’s property price index, the study divided the average house price by the size of the property in each location.

These figures arrive as concerns grow over the shortage of housing compared to the huge demand for homes.

Westminster, and Hammersmith and Fulham came second and third respectively. In fact, the top 20 most expensive places were all boroughs of London.

Where is the Most Expensive Place to Buy a Home in the UK?

Where is the Most Expensive Place to Buy a Home in the UK?

Mortgages Director at Halifax, Craig McKinlay, says: “House price per square metre is a useful measure for house price comparison because it helps to adjust for differences in the size and type of properties between locations.

“While there are areas in central London that are more expensive than anywhere else in the country, there are notable pockets outside the South East where property also has a high price per square metre.”1

Outside the South East, the most expensive places to buy a property are: Edinburgh, Altrincham, Solihull, Leamington Spa and Aberdeen. The cheapest, after Stanley, are: Pontypool, Wishaw and Accrington.

The findings highlight just how spiralling prices are in London, where boroughs such as Lambeth have experienced a 61% rise in just five years.

Concerns of a housing bubble have been around for months recently, and the Bank of England (BoE) has reacted by introducing a stricter mortgage application process to avoid risky lending.

BoE boss Mark Carney revealed the tougher affordability tests, but says they are unlikely to have an immediate affect on soaring house prices.

Last week, Countrywide released a report that ranked the UK as the third worst place to build homes in Europe in regard to population growth. In the last decade, housing development dropped by 35% and Britain built the least amount of houses of all relative countries in Europe.

Countrywide’s Chief Executive, Grenville Turner, comments: “The 2008 downturn in construction should not disguise the fact that the UK has failed to build the required number of new homes over a much longer period of time.

“A long-term lack of house building has meant that the UK was amongst the least well prepared countries to deal with the fall in house building in 2008.”1 

Halifax’s research discovered that house prices per square metre have risen by 13% in the past five years with prices increasing by 34% in London. However, prices in Scotland and the North of England dropped by 5% and 3% correspondingly.

1 http://www.huntersnet.co.uk/lse-blog/most-expensive-place-to-buy-a-house-in-the-uk-is-revealed