Land shortage impact on homes industry
Monday 8th September
FPDSavills say that in 1992 land costs accounted for just under 15% of the value of a new home whereas in 2002 they represented almost 34%. They estimate that, even with the currently extremely low rate of completed sales/homes, there is currently only 2.5 years supply of land with planning permission held by developers.
If housing output were to rise again and move toward the sort of levels demanded by both the market and the government, say to 1998 levels, there would be just over one year’s supply of land suitable for building.
Developable residential land banks were 32% smaller in 2001 than in 1999. This has a serious consequence for the prices of new homes and also for the government who have called upon for 200,000 new homes to be built around Milton Keynes, Ashford, Thames Gateway and Stansted.
Research by SmartNewHomes, the largest new homes web site with 77 individual house builders representing over 50% of the market, suggests that government is merely paying lip service to the industry while there is an increasingly strong demand for new homes.
David Bexon, Chief Executive of SmartNewHomes.com said: “It is highly unlikely that the Government can ever achieve these sorts of targets, due to its own recalcitrance.”
“Some groups will insinuate that greedy developers are sitting on acres of unused land banks but this is simply not the case. The difficulty in getting speedy planning permission is not helping the situation. Housing starts are at an all time low since the war and need to increase significantly, otherwise those land banks are in danger of drying-up to just one year’s reserve.”
“A decent supply of land gives developers some strategic strength. But much of the land that developers are said to hold does not yet have planning permission. The knock on effect to both companies and the consumer could be serious.”
“It will keep prices unnaturally high and impact on the chances of first-time buyers getting onto the property ladder and market activity in general. In the short term house builders may benefit by lack of supply through higher prices but in the longer term they will suffer through decreased activity. The supply of land needs to rapidly increase to get anywhere near the government’s own predicted demand for new homes. The real problem which needs to be addressed here is the planning process in general.”
As reported on TheMoveChannel news last week, see Has housing slow down prompted take-over? the proposed take-over of Wilson Connolly by Taylor Woodrow announced last week would form the UK’s fourth largest house builder. It will give the joint company a relatively healthy 37,000 plots and 3.6years worth of land bank. Chief Executive of Taylor Woodrow said: “This deal addresses the issue of scale. Land is becoming such a commodity.”