C4 Dispatches - The British Property Boom

CLAPTON

ukcarper wrote: »

I believe we would improve the overall housing of people if we just built more properties I just don't think we can practically build enough properties to solve the problem completely.

As for long term housing there are issues it's just like I believe it would be possible to overcome them while you don't.

I'm certainly willing to accept the possibility it is feasible to have long term tenancies.
However, although many seem to support them, few seem to be willing to make any actual practical suggestions.

ukcarper

CLAPTON wrote: »

I'm certainly willing to accept the possibility it is feasible to have long term tenancies.
However, although many seem to support them, few seem to be willing to make any actual practical suggestions.

In that respect I don't think much is going to change, although I think in the long term government own social housing would be cheaper for the tax payer the initial costs are high so would require the government to borrow which they won't do with the current deficit. Also there seem no desire for anybody else to enter the rental market.

CLAPTON

ukcarper wrote: »

In that respect I don't think much is going to change, although I think in the long term government own social housing would be cheaper for the tax payer the initial costs are high so would require the government to borrow which they won't do with the current deficit. Also there seem no desire for anybody else to enter the rental market.

I don't think that whether social housing is cheaper than HB is the primary factor in choosing to expand social housing or not.

Cornucopia

lisyloo wrote: »

Would be helpful if you said what you thought was wrong with that view as it's not clear to me ???

...

I don't believe BTL is the issue. Undersupply is the issue.

Yes, I agree.

Undersupply of land with planning permission (or planning permission feasible) is also an issue. This causes land price inflation, and if you look at the figures, a building plot might be £25k in many parts of Scotland, but £250k in the South East of England. Individual plots are rarely available in London.

I would go as far to say that the issue of how to house the poorest 20% and whether housing is generally over-priced are two different issues.

Thrugelmir

Cornucopia wrote: »

Then there are vested interests like Land-banking builders and NIMBYs opposing planning permission, both of which force up the price of land with PP.

Complete myth. Companies aren't going to want to tie up borrowed capital longer than they need to. Profit comes from developing the land.

sharnad

antrobus wrote: »

Perhaps, but they must be outnumbered by those in in the public sector that earn more than those in the private sector, because the former are getting 14.5% more than the latter. It's simple arithmetic.

It's not simple at all. There can be thousands more public sector staff on low wages but the average can be higher due to the top earnings racking it in

princeofpounds

I'm certainly willing to accept the possibility it is feasible to have long term tenancies.
However, although many seem to support them, few seem to be willing to make any actual practical suggestions.

I have one very simple suggestion, which would go a long way to improving the quality of life for private rental tenants.

Make the minimum period for AST tenancies before a S21 can be issued 1 year, instead of 6 months.

With a 6 month contract, you start anticipating the possible delivery of a S21 notice just 12 weeks after moving in! I think people who haven't been in that situation don't realise the impact the insecurity has on the life choices people are forced to make.

Phone contracts. Energy contracts. Most importantly school places. They all typically last a year. Even gym memberships typically have more permanence!

It is not a perfect solution to anything. But I think it would produce societal benefits disproportionate to the modest societal costs.

----

A short PS: the single largest reason why tenants complain about security of tenure, but then hate long initial contracts, is that you simply have no real idea of the 'product' you are agreeing to purchase. Both in terms of the condition of the property or the conduct of the landlord.

Landlords are also challenged by poor tenants of course, but the threat of a S21 and/or S8 is a far more powerful sanction, the former usable for any trifling reason, than the ability of a tenant to appeal only to limited Section 11 repairing grounds or something similar.

(deposit protection being one area where things are different, thankfully)

Plus remember that the cost of losing your home typically far exceeds the cost of a one month void, so the calculus is already intrinsically disproportionate.

TickersPlaysPop

Thrugelmir wrote: »

Complete myth. Companies aren't going to want to tie up borrowed capital longer than they need to. Profit comes from developing the land.

So you are assuming land in the hands of residential house development companies is dominated by borrowed money? Do you know this as a fact?

Even if a lot of borrowed money is associated with land ownership as long as inflation is above the interest rate it makes sense to hold on to it as an investment?

I don't think this is a simple as you make out.

Have you worked in the finacial dept of residential property development companies? Do you know anybody that does? What is you career background?

princeofpounds

Have you worked in the finacial dept of residential property development companies? Do you know anybody that does? What is you career background?

Actually thrugelmir is - with some nuances - right.

The objective of business is to maximise returns on equity capital (technically there are various ways of looking at this, but this will do for now).

Consider the standard Dupont model:

ROE = net profit/sales x sales/assets x assets/equity

The more sales you can make, on the least assets, the better for your returns. You can also use borrowed money to boost the size of your asset base relative to your equity, but beyond a certain point that becomes too risky.

So businesses in general prefer to be as 'capital-light' as possible. They don't like to hang on to assets that aren't producing sales.

There is an temporary exception to this if the profitability from land appreciation exceeds that of sales, although a) it's never a cash profit until sold and b) it's highly uncertain, unlike developing a plot. So a whilst businesses might get somewhat more or less speculative with their landbanks, it is not a core aspect of their business through the cycle.

The listed UK housebuilders have about 300k land bank plots in total. They are currently completing about 60k plots a year. So they have 5 years of land supply. Given that it probably takes 3-5 years to complete an average development, including the planning, design, construction and sales cycles, often with several phases, then this is an entirely reasonable number.

In the last 10 years ( through the housing crash and the boom), the builders have had between 280k and 340k plots. So their behaviour has actually been rather consistent over time, with no evidence of hoarding in excess of development. Smaller housebuilders actually tend to be far more speculative.

If there is an artificial shortage of developable land (and there is), the root cause is almost entirely the restrictive planning system.

The big builders do benefit unfairly from this system, not because they hoard, but because they are the only people with the firepower to fight through the bureaucratic muck that is our planning system, and so they can enjoy planning uplift that is rarely available to the ordinary person or even small developers.

wotsthat

TickersPlaysPop wrote: »

Have you worked in the finacial dept of residential property development companies? Do you know anybody that does? What is you career background?

Just look at Taylor Wimpey's 2013 accounts and search for the word 'debt' or 'finance'.

I'd do it for you but haven't got my GCSE results available to prove I'm competent enough to use Google.