Author Archives: Max

2018- Is it the start of a Down-turn for the Housing market?

Some people active in the industry have forgotten 2008. After all, it is now 10 years ago, so some in the industry were not even working then. However, some older heads really should know better about the cyclical nature of the industry. How about 1981, 1989 and even before that, 1973? Each has been a crash which was unforeseen. It is very difficult to see what particular straw will bring it all crashing down.

What are the reasons for the current “good picture” to continue? It must be the need for housing compared to the supply. However, it is easily arguable that these are not matched at all. There is a need for proper affordable housing which would be described as social rent housing, but, who is going to build that? Certainly not the private sectors as returns are very low and long term. It is a job for Local Authorities but they are not allowed to borrow to build and they haven’t got the skill base either. Meanwhile, Housing Associations pretend to build affordable housing at affordable rents which are not really affordable at all and develop shared equity sale homes which lock people into the market at unsustainable levels.

How about the favourable planning regime? Well, certainly it is somewhat easier to get planning these days after the NPPF (National Planning Policy Framework) but, not so easy to sort out conditions, CIL (Community Infrastructure Levy), and deal with all the environmental matters that now apply from Badgers to crayfish and innumerable other critters! So, start on site can be delayed as planning officers are under tremendous pressure to deal with these “minor matters” which don’t attract large fees.

How about the finance side? Money is available now it seems. Or, is it? Where is the small builder sector that provided variety to housing schemes? The reality is that large deposits are still required to borrow money. The returns are not available after finance charges to make the risk of speculative, small scale house building worthwhile in practice. Cheap land, which was the bedrock of that small scale industry, no longer exists as most landowners are now properly advised.

So, where is the straw that brings it tumbling down? The removal of “Help to Buy” perhaps? Rising interest rates, which the USA can seem to plan for as the Trump economy booms along for now? Scandals as house builder directors pocket millionaire sized bonus schemes? The re-direction of HA funds to deal with fire protection rather than new build schemes? Maybe an acceptance from large swathes of the millennial population that home ownership is not for them- unlike previous generations? The election of a left wing “Corbynista” government perhaps?

In practice it will be a combination but, there will be one identified apocryphal trigger for sure. I wonder what it will be? Let’s hope it does not come in 2018 but, be in no doubt it will come for sure-it is just a matter of time. Prepare your strategy for dealing with it while the sun still shines!

For advice or guidance on any of the strategies or issues outlined in the article, contact us, MFE can help you prepare!

Report: Boost Housing Numbers by Cutting Red Tape

A new report from the Home Builders Federation (HBF), published yesterday, highlights how small and medium sized housebuilders are facing significant obstacles to their businesses in the form of unnecessary red tape. It is estimated that at least 25,000 more new homes could be built every year if current regulations were to be relaxed.

There is particular concern that it is has become difficult for new housebuilding companies to grow to any significant size, in contrast to larger housebuilders who are seeing their growth hold steady. In order to increase new housing numbers to a level meeting government targets, the report says that small and medium sized housebuilders must grow at a faster rate – particularly since the vast increase in the number of new homes being built over the last decade has been almost entirely due to expansion by larger housebuilders.

Various recommendations are made in the report, including using Brexit as an opportunity to reform regulations on housebuilding, making it simpler to build new homes quickly.

Source: Property Investor Today