Builders ‘drip-feed’ homes to halt price falls (The Times)

Housebuilders are “drip-feeding” homes on to the market to prevent further falls in prices, industry experts claimed yesterday.

They said that the practice — to avoid flooding the market — was widespread among large-scale builders such as Barratt and blamed a lack of competition among the developers of large sites for the problem.

Yolande Barnes, head of research at Savills, the estate agency and property adviser, said: “The business model of housebuilders is to deliver a certain rate of sales at a certain price in the short term. This is partly because if you have a large site with thousands of similar homes, you can only sell so many of one type before you flood the market.”

Recent research by Savills indicates that of 29,000 new-build units in London that are either under construction or finished, around one third are not yet up for sale and only 916 are vacant and ready to be occupied — equivalent to two months’ supply, according to Savills.

Greater competition between developers on site would mean that houses would come to the market more quickly, Wayne Hemingway, the housing designer, said. “For one developer to have control over a large building site is like a high street where Woolworths is the only shop. The result is a mono-culture of identikit homes, which can be drip-fed on to the market.”

The critical comments coincide with the publication of a report today that will warn of a long-term housing shortage. The National Housing and Planning Advice Unit (NHPAU) will say that steps to close the gap between supply and demand for housing must be taken “or the consequences for individuals and families will become increasingly severe, with wider economic and social impact”. The report will say: “Recessions do not have a big impact on the number of households wanting homes but they do lead to a sharp drop in the number of homes being built.”

A spokesman for Barratt said: “We are always trying to match supply with demand.”

Housebuilding in England fell by 44 per cent in the first quarter of this year compared with the same period last year, official figures show, with housing starts down by 42 per cent to 90,430 in the year to April 2009.

Britain’s biggest housebuilders have said that they are planning to start work on new sites as signs emerge that the market is beginning to improve. Persimmon, one of the biggest housebuilders, gave an upbeat trading update yesterday for the first six months of the year. Mike Farley, chief executive, said that keeping tight control on work in progress had helped the housebuilder to generate more cash and reduce debt levels in the first half.

Persimmon has completed 4,006 homes in the six months to June, compared with 5,500 in the same period last year, and has 390 sales outlets, compared with 460 in June last year. The housebuilder added that sales volumes have consistently been ahead of the first six months of 2008 and there are plans to start work on 50 new sites in the second half of 2009.

Cancellations are running at an historic low of 16 per cent, although Mr Farley said that low valuations by mortgage lenders were still a problem for some buyers.

The group said that it had reduced borrowing from £906 million in June 2008 to £495 million and forward orders are now ahead of last year at £700 million, compared with a previous figure of £650 million.