Number of new builds per year/style of construction.-a query

GreatApe

the build rate and supply of housing is sufficient in most of the uk, pleases like Scotland Wales N-Ireland north-England east&west midlands & yorkshire etc that have not gone up in price for 10 years have sufficient supply that is some 70% of the country.

The shortage of new builds is in inner London and the only solution to that is knocking down the council estates and building at 2.5x the density. But knocking down an estate of 500 flats and building 1250 in its place is disruptive so locals protest and its also quite expensive. You are effectively building and paying for the labor and materials of 1250 flats but only really getting 750 for your efforts. This is before you even consider the overheads and time and capital between the projects and the need to spend a lot to meet modern regs and the fact that labor is more expensive in London. So no easy cheap or quick solutions to meet the additional needs for homes in inner London

Cornucopia

GreatApe wrote: »

the build rate and supply of housing is sufficient in most of the uk, pleases like Scotland Wales N-Ireland north-England east&west midlands & yorkshire etc that have not gone up in price for 10 years have sufficient supply that is some 70% of the country.

Government should move more of its own functions away from London to those other areas of the country. It would have economic, political and social benefits.

The shortage of new builds is in inner London and the only solution to that is knocking down the council estates and building at 2.5x the density. But knocking down an estate of 500 flats and building 1250 in its place is disruptive so locals protest and its also quite expensive. You are effectively building and paying for the labor and materials of 1250 flats but only really getting 750 for your efforts. This is before you even consider the overheads and time and capital between the projects and the need to spend a lot to meet modern regs and the fact that labor is more expensive in London. So no easy cheap or quick solutions to meet the additional needs for homes in inner London

Inner London has always been expensive, and I don't really see that there is a need to address that, especially if it involves displacing anyone else.

Zone 2/3 London has now become expensive through gentrification over the past 30-40 years. The same issues you highlight apply there. Again, I don't see any need to take heroic action simply to address what is effectively a change in fashion.

There may be a need to provide more social housing to replace that which has been lost through Right to Buy.

It is the broader South East England picture that concerns me. You can see pressure on prices 50-75 miles from London - distances that are far from being easy/cheap/practical commuting. In my area, around 45 miles from London, there is a marked difference in prices (up to £200k) between houses on the open market and new builds. That suggests both pent-up demand for better quality housing and also a price increase that is beginning to be expressed in the market.

So, I think there is a need for more new building in the remainder of the South East, outside London. Coincidentally, there is plenty of space, and coincidentally, it could take some pressure away from over-heated London areas. I think it needs careful planning both as in-fill development and as new towns and villages. It needs to work with existing and planned transport improvements, and above all it needs sympathetic improvements to local services.

(As an aside, I am not convinced that the present approach of massive in-fill development solely of housing with often no other facilities is the right approach, but that is another matter).

However, to do nothing is not an option, because house prices at 15-20x local salaries are not sustainable.

Cornucopia

westernpromise wrote: »

Houses aren't phones although there are many Generation Xers who'd rather have the latest phone than a house.

I think you mean "Millennials".

martinsurrey

Cornucopia wrote: »

I'm not sure I follow your maths, or the logic behind it. Builders are already committed to the cost of land - that is a constant throughout the build cycle - the sooner they complete and sell a house, the sooner that investment is repaid. So to say that the entire sale cost is tied up or at stake only during the build phase is not quite right.

Land (raw land price) is about 25% of the sales value of a plot, s106 and other planning costs are around 15%, build is around 40% profit is about 20%

the s106 payments are triggered by legal completions in a lot of cases (especially on large sites).

lets sue some numbers on a worst case land deal (all paid up front) - 500 unit site, £400k houses = £200m sales value

raw land price = £50m

s106 +other land = £20m

build = £80m

profit = £40m

they build the entire site at once,

Land + Build = peak WIP of £140m and 500 houses to sell at once.

Build 100 houses, WIP = £60m+£16m = £76m with 100 houses to sell.

that peak WIP requirement (an additional £64m) is a huge hurdle to overcome, and a massive risk to the developer, one bad issue on the site and they could be toast.

also large sites also tend to have deferred payment terms on the land, so the developer doesn't pay for it all up front (for example persimmon had £573m of land payments deferred at the end of FY15, which equals about 1/6 of turnover, or £30m in our site above, dropping the whole site at once WIP to £110m, but the staged peak WIP to only £46m, a far less dangerous position to be in).

Cornucopia wrote: »

Sure. But moving off-site changes the logistics considerably. Can't lay bricks in the rain? No problem.

You're right, and off site manufacturing will become more common, but 2-3 is never going to happen.

Cornucopia wrote: »

Is there a particular reason why you're estimating a completion rate over 3 times what they actually achieved last year? Are you saying they WERE dragging their feet last year, or are you accepting that rather than holding 3 years worth of property, it is actually nearer to 10?

the large numbers are for the WHOLE of the UK, the smaller ones are for the three largest developers, the 3 large completed 44k houses on a land bank of 200k.

the WHOLE of the UK managed about 150k houses on 450k of planning permissions.

Cornucopia wrote: »

I can envisage a new mode of housing supply where a local authority works with multiple eco-build developers and part of that process would be for the authority to deliver a site that is already planned, remediated, ground-worked, and with utilities plumbed in to defined plots. The developers can then move in, and undertake the 2-3 week build per property that is needed, and with maybe 15-20 developer teams working, from multiple companies, perhaps populate a 500 home site in 18 months - and depending on how clever the logistical phasing of the site was, there could be intermediate releases of whole streets throughout that period.

so the planning is already done, that includes all detailed finishes, window materials, render colours, door types and finishes, every external measurement, position of every house (not just plot) landscaping on communal areas, which means every developer has completed every design feature (bar internal layout) before a single property has been built, and that needs to happen before the first road can be laid (you need detailed planning for that, as well as highways approval, which will need a neighborhood plan)

You've gone from 2-3 weeks water tight to 2-3 weeks total? Water tight does not equal finished.

These 20 developers will STILL be looking to employ hundreds of tilers, plasterers, landscapers, all at the same time.

Also, the drains, and utilities are already in - place to each plot, the developers will need access for cranes and earth movers (foundations) and huge cement trucks, they are going to go over the nice pavements and roads, and pipes the council have already laid?

getting that many properties built at once is possible , but it wont be cheap.

Cornucopia

martinsurrey wrote: »

Land (raw land price) is about 25% of the sales value of a plot, s106 and other planning costs are around 15%, build is around 40% profit is about 20%

Presumably that varies dramatically between say, Inner London, and Rural Scotland, due to the massive difference in the price of land.

To be clear, I am talking mainly about those parts of the country where there is presently significant demand for housing that is placing continued pressure on prices.

lets sue some numbers on a worst case land deal (all paid up front) - 500 unit site, £400k houses = £200m sales value

raw land price = £50m

s106 +other land = £20m

build = £80m

profit = £40m

they build the entire site at once,

Land + Build = peak WIP of £140m and 500 houses to sell at once.

Build 100 houses, WIP = £60m+£16m = £76m with 100 houses to sell.

I'm sure that's all true (within the scope of the averages you are using). However, I've already said that I am not talking about delivering 500 houses all at once. Clearly there will still be a phased delivery schedule, I just want it to be faster than the present painfully slow contribution in high-demand areas that the major builders are making.

that peak WIP requirement (an additional £64m) is a huge hurdle to overcome, and a massive risk to the developer, one bad issue on the site and they could be toast.

Sure. Maybe they could adopt the corporate structure of the film industry, which has similar issues. They (sometimes) set up a specific limited liability company to deliver a particular project, so as to allow a degree of ringfencing of risk.

I don't accept the premise, though, that a business that is there to build should (for whatever reason) not build as quickly as the market demands, and if this is a problem for them then I suspect Government will resolve things for them in the end.

also large sites also tend to have deferred payment terms on the land, so the developer doesn't pay for it all up front (for example persimmon had £573m of land payments deferred at the end of FY15, which equals about 1/6 of turnover, or £30m in our site above, dropping the whole site at once WIP to £110m, but the staged peak WIP to only £46m, a far less dangerous position to be in).

Ah, okay, so they are defraying some of their investment risk on to a supplier. I'm not sure I approve of that. Either way, that puts an entirely different slant on the WIP funding analysis you detailed above.

You're right, and off site manufacturing will become more common, but 2-3 is never going to happen.

2-3 weeks? It already is, certainly at the lightest end of what is buildable.

the large numbers are for the WHOLE of the UK, the smaller ones are for the three largest developers, the 3 large completed 44k houses on a land bank of 200k.

Except that their landbank (according to your post) is 476,000. I think you're still crossing the streams, which is never good.

so the planning is already done...

I think we're in danger of applying old world characteristics to my new world suggestion. There will not be, for example, concrete trucks rolling over already installed sewage pipes because (a) many eco-build technologies don't use vast quantities of concrete, and (b) the roads will already be paved to site standard (i.e. ready for traffic but without the final surfacing).

I'm imagining the local authority delivering something akin to a caravan park layout, without the caravans. That enables an eco-build company to come in and drop a house onto a concrete pad or set of pads, and to connect up to plumbing and electrics already in the ground.

So the prep work goes to pad stage, where the road and utilities network is designed and installed in the ground, and the house types, positions and sizes are known.

FWIW, I think we're beginning to get a sense of what isn't possible under the present regime, and why. Some of it is about practicality, some about conservatism amongst builders, government and the Public, and some about the finances.

We need more homes in various parts of the UK. In some areas, the demand is urgent. Therefore trickling properties on to the market to ensure a healthy profit really doesn't serve the public interest.

CLAPTON

Cornucopia wrote: »

We need more homes in various parts of the UK. In some areas, the demand is urgent. Therefore trickling properties on to the market to ensure a healthy profit really doesn't serve the public interest.

there are loads of entrepreneurs in the UK and loads of money for profitable activities and building isn't rocket science

if there is money to be made, why aren't there dozens of new companies entering the market

Cornucopia

CLAPTON wrote: »

there are loads of entrepreneurs in the UK and loads of money for profitable activities and building isn't rocket science

if there is money to be made, why aren't there dozens of new companies entering the market

We've already discussed in much detail the reasons why the low-cost eco-build end of the building industry is not favoured in the UK.

The question for me is whether there is genuine harm being done in tying the Public into 25-year mortgages worth several £100k, when they could (potentially) acquire a home for substantially less immediate cost, at the possible partial sacrifice of HPI equity down the line.

CLAPTON

Cornucopia wrote: »

We've already discussed in much detail the reasons why the low-cost eco-build end of the building industry is not favoured in the UK.

The question for me is whether there is genuine harm being done in tying the Public into 25-year mortgages worth several £100k, when they could (potentially) acquire a home for substantially less immediate cost, at the possible partial sacrifice of HPI equity down the line.

my remark related to trickling property onto the market deliberably to maintain prices

Cornucopia

CLAPTON wrote: »

my remark related to trickling property onto the market deliberably to maintain prices

There is very little land available with consent or the possibility of consent. The process is fairly well locked down to dissuade other development.

Equally, the costs involved are huge compared to other types of businesses that small investors might get involved in.

What is your suggestion - that the big builders are somehow uniquely qualified, because in my experience they really aren't very good at what they do.

CLAPTON

Cornucopia wrote: »

There is very little land available with consent or the possibility of consent. The process is fairly well locked down to dissuade other development.

we have a major problem with our planning processes, the timescales and the costs : down to government

Equally, the costs involved are huge compared to other types of businesses that small investors might get involved in.

there is no shortage of money : its just that building isn't that profitable and the bureaucracy enormous.

What is your suggestion - that the big builders are somehow uniquely qualified, because in my experience they really aren't very good at what they do.

we need to free up the planning processes, abolish requirement for affordable housing etc and make the process profitable to encourage more entrants into the market.