House Prices "Heavily Undervalued" says Times article

chewmylegoff

wotsthat wrote: »

I think there might be an issue with builders sitting on plots with permission but not then developing them.

I very much doubt that it's a) very significant or b) a real attempt to stifle supply. Given the riches that some people think it's possible to earn by building houses the common sense approach would be to build houses rather than hold land.

It would be good to see not an undeveloped parcel of land 10 years after planning because that proves nothing but some data on what the average time from planning to first completion is. Exceptions tend to be used to prove rules in these arguments.

Maybe consider a complaint to the office of fair trading?

I think there is actually an issue specifically with listed house builders not wanting to use land they paid large amounts for in the lead up to the crisis (in the anticipation that prices would continue to rise so by the time they had built houses on it they would still make £££) because if they end up selling it for a loss then they might have to impair all their other land, resulting in a signficant hit to profit, angry shareholders and most importantly lower bonuses for the directors.

I know someone in the accounts dept of a listed builder who suggests that they are reluctant to develop sites in certain areas bought in the five years up to the credit crunch for this reason (rather than not being able to sell houses on it at current market values) although what the extent of it is I have no idea.

Logically it wouldn't impact on an unlisted entity as they would be far more interest in cash flow and wouldn't have accountability to institutional shareholders.

shortchanged_2

wotsthat wrote: »

http://www.oft.gov.uk/OFTwork/competition-act-and-cartels/cartels/complain#.UgTmV5LbPSg

Please let us know how you get on.

Thanks for that wotsthat.

I thought the last paragraph on that site rang very true.

"Remember, cartels result in higher prices, poorer quality and less or no choice."

Sound familiar?

OffGridLiving

wotsthat wrote: »

http://www.oft.gov.uk/OFTwork/competition-act-and-cartels/cartels/complain#.UgTmV5LbPSg

Please let us know how you get on.

You can imagine the phone call.

OFTWork: "Hello, this is OFTWork, can I help you?"
Shortchanged: "Yes, I believe that house building firms are operating a cartel and holding onto land to force prices up."
OFTWork: "Can you tell me which building firms?"
Shortchanged: "Yes, all of them."
OFTWork: "Oh.. OK. Can you supply us with proof to substantiate your accusations?"
Shortchanged: "Yes, it's obvious. There is very little genuine competition in the housing market and these large companies seem to trickle the supply of new houses out even though there is this significant demand for their product and thus maintain higher prices by this means"
OFTWork: "Oh... is that it?"
Shortchanged: "What more do you need! It's as plain as a pikestaff!".
OFTWork: "I believe that the reason that builders are not building houses is because of bank lending, both for the house builders to borrow money to build the properties and for buyers to obtain mortgages".
Shortchanged: "Gah! You're just a scumbag propery ramper!! Houses are too expensive I tells ya!"
OFTWork: "Hmnnnn. Goodbye".

wotsthat

shortchanged wrote: »

Thanks for that wotsthat.

I thought the last paragraph on that site rang very true.

"Remember, cartels result in higher prices, poorer quality and less or no choice."

Sound familiar?

Sounds like you've got them banged to rights.

shortchanged_2

OffGridLiving wrote: »

You can imagine the phone call.

OFTWork: "Hello, this is OFTWork, can I help you?"
Shortchanged: "Yes, I believe that house building firms are operating a cartel and holding onto land to force prices up."
OFTWork: "Can you tell me which building firms?"
Shortchanged: "Yes, all of them."
OFTWork: "Oh.. OK. Can you supply us with proof to substantiate your accusations?"
Shortchanged: "Yes, it's obvious. There is very little genuine competition in the housing market and these large companies seem to trickle the supply of new houses out even though there is this significant demand for their product and thus maintain higher prices by this means"
OFTWork: "Oh... is that it?"
Shortchanged: "What more do you need! It's as plain as a pikestaff!".
OFTWork: "I believe that the reason that builders are not building houses is because of bank lending, both for the house builders to borrow money to build the properties and for buyers to obtain mortgages".
Shortchanged: "Gah! You're just a scumbag propery ramper!! Houses are too expensive I tells ya!"
OFTWork: "Hmnnnn. Goodbye".

:rotfl:

That's cracking renoman.

Is that what you call an ad hominem?

chucky

shortchanged wrote: »

Have you seen the make up of the cabinet. http://www.dailymail.co.uk/news/election/article-1280554/The-coalition-millionaires-23-29-member-new-cabinet-worth-1m--Lib-Dems-just-wealthy-Tories.html

Granted its a little old but it's mostly the same old cronies.

And the conservatives have never had much time for social housing so they are never going to facilitate mass social house building schemes.

Plus the big building companies have the ear of one or two MP's.

So it's not only a cartel but a cartel that has government involvement to stop hard working normal people buying a house by pricing them out.

That's a great conspiracy theory Shortlegs.

shortchanged_2

chucky wrote: »

So it's not only a cartel but a cartel that has government involvement to stop hard working normal people buying a house by pricing them out.

That's a great conspiracy theory Shortlegs.

Cheers chuckles.

CLAPTON

shortchanged wrote: »

I do actually believe that the large building companies are acting like a cartel.
There is very little genuine competition in the housing market and these large companies seem to trickle the supply of new houses out even though there is this significant demand for their product and thus maintain higher prices by this means.

So why don't the thousands of small building firms start building, making great profits and getting bigger?

wotsthat

chewmylegoff wrote: »

I think there is actually an issue specifically with listed house builders not wanting to use land they paid large amounts for in the lead up to the crisis (in the anticipation that prices would continue to rise so by the time they had built houses on it they would still make £££) because if they end up selling it for a loss then they might have to impair all their other land, resulting in a signficant hit to profit, angry shareholders and most importantly lower bonuses for the directors.

I don't know how easy this would be to get away with in the accounts as they have to convince the auditors that the valuations are reasonable. Valuing a small number of plots at £10 would be difficult when they've been buying at £7.50 since the start of the recession.

shortchanged_2

CLAPTON wrote: »

So why don't the thousands of small building firms start building, making great profits and getting bigger?

Perhaps because the big companies are buying up all the large pieces of development land and are just sitting on them. Just a thought.