House builders optimistic despite market uncertainty

Ryan Fowler

November 1, 2016

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House builders in Britain are optimistic despite market uncertainty and skills shortage but a third regard Brexit as a major challenge, new research has found.

The sector’s confidence is reflected in average five year investment plans, increasing 17% year on year and average growth over five years of 28% predicted, up from 25% last year.

The annual commercial banking report on the UK house building sector from Lloyds Bank also reveals that as well as Brexit major challenges ahead include the rising cost of raw materials, the current planning system and industry skills shortages.

Annual house price growth rises for first time in eight months

However, despite challenges including the current planning system, a skills shortage and uncertainty following the EU referendum, house builders are forecasting increased growth and investment.

The report is the first in-depth study of the sector following the decision to leave the EU and confirms that optimism about the future of the house building industry has picked up slightly from 7.1 last year to 7.2 in 2016, with 10 representing the highest level of expectation.

It seems that this outlook has given the industry the confidence to invest, with average five year investment plans up 17% year on year.

House builders are also confident about growth with 42% of respondents saying that their growth forecasts had improved since the EU vote compared with 27% who said they had declined. They are now predicting an average growth of 28% over the next five years, up from 25% last year.

Meanwhile, new research from land broker Aston Mead suggests that joint venture partnerships between local authorities and developers could accelerate the building of affordable homes.

The firm suggest councils could offer selected land to developers as part of joint venture partnerships which would prevent developers having to raise funding for both the purchase and build of properties, something which SME developers in particular find difficult to do.

‘The simple truth is that no developer is going to consider a site when as much as half of it has to be classed as affordable. Instead, we need a radical new approach to the problem, and as the largest landowners in the country I believe local authorities can provide the solution,’ said land and planning director Adam Hesse.

He explained that councils already have to make available lists of land which they own and under a partnership it could be offered on the basis that at least 50% of it is for affordable homes. The developers could then have the opportunity to bid for each site on a sealed tender basis which would ensure that the local authority is getting the best price possible.

‘The developer gets almost immediate income back from having a readymade buyer who will take 50% of the housing off their hands, perhaps in staged payments, and the council gets its cut of the profits following the sale of the private section,’ added Hesse.

He believes that such an approach would mean more land is brought forward for development, particularly the smaller sites in towns and villages that are badly needed, and brings with it a whole host of benefits.

‘This way developers get to crack on without long planning issues because the local authority will have been supporting them from the very start, and the council get the 50% target they are looking for or even higher if necessary. It might go on to prove that it’s possible to develop affordable housing next to private homes and make it work successfully and if so, it might encourage other schemes to follow suit,’ Hesse pointed out.

‘Increasing the amount of affordable housing is one of the key considerations in construction today. We need to provide more, both for the people who need a roof over their heads, and to reduce the impact housing has on the rising cost of living,’ he added.

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