Why prop up the new build market instead of the ENTIRE property market??

Crashy_Time

Help To Borrow (More than you should for a Basic house) that is all it is.

Mickey666

AdrianC said:

princeofpounds said:

The biggest problem we have in this country is the roadblock of the planning system, which is why we require these monolithic housebuilders constructing identikit slave boxes on soulless estates - they are the only ones with enough resources (political, financial and administrative) to plough their way through the planning system to get homes built in volume. Go to pretty much any western european environment outside of the cities and you'll see plenty of people building homes they intend to live on on individual plots, or small-scale developments, which produces a far nicer environment with a better quality product. And all for lower prices, because the development land is not made so scarce.

No, it's nowhere near that simple.

Developments are in high demand... but not everywhere.
Where urban and suburban developments are particularly high demand, the economics of buying a brownfield ex-industrial site and splitting it off into individual plots just cannot work.

The easy infills, big-back-garden-devs, and hovel-replacements have already been done, long since.

So that leaves brownfield. Even if we ignore the economics of it, who wants the hassle factor of buying an old factory site to knock down and decontaminate, just so they can carve a quarter of an acre off and then flog the rest to somebody else...? Either in quarter-acre parcels or as a whole? You can bet the previous owner of the factory doesn't want that grief - they just want the whole lot gone.

If you start to look at rural locations, then it all becomes much more possible. I could point you to umpteen small-scale (single-figure) infill devs round here in the last few years - and as many plots, or places crying out to be massively refurbed or demolished and started-again. But, again, who can afford to buy a field and do a Kevin without selling their old place first? Who's going to lend half a million quid against a muddy field and a scrawled sketch or three? And do the numbers even add up in many lower-cost rural locations?

One of my nearest towns has a choice all within about 100m on the same road... £100k new-build flats which are still for sale nearly a decade after completion but have been let by the developers in the meantime, A <£300k 4-bed Victorian semi with land and garaging... and an old builder's yard being redeveloped by a small local builder for 9 2- and 3-bed places... The land was being marketed for £250k for half an acre, no s106.

Well, you're right that it's not so simple - but you've missed the point that princeofpounds was making (and I was agreeing with) that it's only developers who have the resources to navigate, nay force, their way through the complex and restrictive planning bureaucracy - something that the average self-builder could not even begin to contemplate.  I've met with companies who specialise in getting planning consent on suitable sites and then selling it on - they have no interest in building houses.  Their business model is based on the very assumption that they won't get planning consent at the first attempt but they know from experience that they'll have a very high chance of winning at appeal because councils have limited budgets to effectively contest such appeals.  They scour the country looking for suitable opportunities and sign option deals with the landowner and are happy to pay significant amounts for, say, a 10 year option.  They will then seek planning consent, get refused and then appeal strongly and likely win consent.  The land price is now significantly higher so they sell it on for the agreed 50:50 split (or whatever) with the landowner . . . except that all their costs in gaining planning consent plus the option advance are deducted first, which was part of the deal.  The landowner has no control over the eventual sale price because that is contractually limited to 'fair market price', so yes the landowner makes a profit but they have effectively paid for all the costs of obtaining planning consent . . . over which they also had no control. 
Basically these companies are contributing nothing to housing numbers except for actually bludgeoning councils to give planning consent, at which point they sell the land on to a developer.  This whole expensive and time-consuming process could be eliminated at a stroke by making planning consent easier to obtain.  This would revolutionise the self-build (more accurately 'custom build') market with the result that people could buy affordable, decent-sized, quality detached homes instead of the developer 'hutches' blighting the country everywhere.
Building a house is not a particularly complicated project - you've only got to think about the sort of people who do it for a living.  No offence, but it's not really rocket science is it?  Nor is it particularly expensive if you take away the cost of land with planning consent.  I know someone who had a 5-bed detached house built for around £120k about 15 years ago (excluding the land price) - and not a pokey 'developer new build' either.  I also know a young couple who are currently building a large 4-bed house in an acre of land, this time by themselves using friends and acquaintances in the building trade.  They reckon it will come in at well under £100k, which in this case includes the land as they've got consent to build on their family farm, but even at another £100k for the land that's still only £200k for a large family home in an acre.  They'll probably be mortgage free by their mid-30s.
Houses are cheap to build, it's all the bureaucracy and effective developer monopoly that makes them expensive to buy.

AdrianC

Mickey666 said:
but you've missed the point that princeofpounds was making (and I was agreeing with) that it's only developers who have the resources to navigate, nay force, their way through the complex and restrictive planning bureaucracy - something that the average self-builder could not even begin to contemplate.

Yes, they can. Of course they can.
They may find it easier to hire a planning consultant - I did when we were building a garage. He charged me a few hundred quid.

And I repeat - there are plenty of infill-build and small local-building-firm developments around here. With self-gained PP.

I've met with companies who specialise in getting planning consent on suitable sites and then selling it on - they have no interest in building houses.  Their business model is based on the very assumption that they won't get planning consent at the first attempt but they know from experience that they'll have a very high chance of winning at appeal because councils have limited budgets to effectively contest such appeals.  They scour the country looking for suitable opportunities and sign option deals with the landowner and are happy to pay significant amounts for, say, a 10 year option.  They will then seek planning consent, get refused and then appeal strongly and likely win consent.  The land price is now significantly higher so they sell it on for the agreed 50:50 split (or whatever) with the landowner . . . except that all their costs in gaining planning consent plus the option advance are deducted first, which was part of the deal.  The landowner has no control over the eventual sale price because that is contractually limited to 'fair market price', so yes the landowner makes a profit but they have effectively paid for all the costs of obtaining planning consent . . . over which they also had no control.

So why didn't the landowner simply do that themselves?
As you say, they paid for the costs of doing it...

And why aren't the developers just buying the land straight from the landowner and gaining PP themselves?

I know someone who had a 5-bed detached house built for around £120k about 15 years ago (excluding the land price) - and not a pokey 'developer new build' either.  I also know a young couple who are currently building a large 4-bed house in an acre of land, this time by themselves using friends and acquaintances in the building trade.  They reckon it will come in at well under £100k, which in this case includes the land as they've got consent to build on their family farm, but even at another £100k for the land that's still only £200k for a large family home in an acre.  They'll probably be mortgage free by their mid-30s.
Houses are cheap to build, it's all the bureaucracy and effective developer monopoly that makes them expensive to buy.

Anybody who has ever contemplated an extension says "cobblers" to that.

Even if you completely ignore the substantial cost of labour in building the property, the materials and equipment are far from cheap.

What's the usual extension rule-of-thumb? £1k/m2...
Hold on - this reckons that's way out of date, and now £1,100-1,400. Plus vat, but that's reclaimable on a new-build.
https://www.mybuilder.com/pricing-guides/house-extension-costs

princeofpounds

AdrianC said:

No, it's nowhere near that simple.

Developments are in high demand... but not everywhere.
Where urban and suburban developments are particularly high demand, the economics of buying a brownfield ex-industrial site and splitting it off into individual plots just cannot work.

Not trying to create an argument with you Adrian, but I think we may be talking about cross-purposes at this point. I didn't suggest anything about buying brownfield ex-industrial sites and splitting it off into individual plots. And I was specifically talking about outside the cities, as I noted.

AdrianC said:

If you start to look at rural locations, then it all becomes much more possible. I could point you to umpteen small-scale (single-figure) infill devs round here in the last few years - and as many plots, or places crying out to be massively refurbed or demolished and started-again. But, again, who can afford to buy a field and do a Kevin without selling their old place first? Who's going to lend half a million quid against a muddy field and a scrawled sketch or three? And do the numbers even add up in many lower-cost rural locations?

This is more what I am talking about. Take for example the link below to a stock photo 'aerial view of a typical german suburb'. This is not cherry-picked - I could have given you countless French, Dutch or Belgian equivalents. Reasonably dense, but plenty of detached houses with garden space and green streets. Variation in architecture, but some economies of scale are achieved by following typical patterns; your house may be identical to one on a different street, but not your neighbours.

https://www.istockphoto.com/photo/aerial-view-of-a-typical-german-suburb-with-detached-houses-and-close-neighbourhood-gm1039757970-278350080

Compare to the cramped, identikit monstrosities that British planning policy and volume housebuilding delivers (this one is cherry-picked, but only slightly in the sense that it was one of the first few google images that illustrated a comparable environment, I didn't try to find a bad example of the genre!).

https://www.archdaily.com/779734/playing-the-housing-game-for-profit-the-british-volume-housebuilding-project/568c5cdde58ece62ae00053a-playing-the-housing-game-for-profit-the-british-volume-housebuilding-project-photo

It's not about doing a Kevin either - these houses are comfortable, but not complex. The key is that land is more easily developable at the edges of suburbs and semi-rural villages. Vast numbers of people can afford to raise a mortgage to cover the cost of building a property, what stops the economics from working in the UK is the premium on developable land caused by the administrative barrier of planning policy. Arable land on the southern outskirts of Birmingham costs roughly £8k an acre (Farmer's Weekly, 2015, so maybe a touch higher now, this is just an illustration). The very same land with planning permission is worth about £1m an acre.

We need to bring that 250k for a quarter acre plot closer to the 2k it would cost if there were no restrictions on building (obviously the 'real' value in an unrestricted market would be somewhere in-between, but on the lower side given the relative sizes of the two markets for developable and non-developable land). That is how you solve the housing affordability problem, at root. If people can't bridge the construction period with their own resources (most stay with family or rent for a year) then local housebuilders will often finance the developments themselves.

The main criticism of this is that it's 'urban sprawl'. But the fact is that so-called urban sprawl is often the nicest, safest and most productive environment to bring up families, and the sort of housing that most families choose if they are given a chance. I used to be more sympathetic to British planning policies before I learnt about how Stalinist they actually are, and if you look at the actual results of what the system produces it's just plain disappointing. Monoculture agricultural fields are preserved to little purpose. Scrapyards and caravan storage sites masquerade as greenbelt 'farms'. Slavebox estates. God it's depressing. I suppose we get a profusion of Surrey golf courses and equestrian fields for Tarquin and Jemima to enjoy at least.

Silvertabby

I know this won't apply in all HTB cases - but my niece and her husband are already starting to panic.  They have just a few months to go before their 5 year 'free' loan expires - at which point they don't expect to be able to re-mortgage to cover the loan because their house hasn't risen in value, and they know that they will struggle to meet the HTB payments.

Bank of mum and dad probably won't be able to help - they took out some form of equity release to give their daughter and husband their 'own' deposit.  To be honest, I'm dreading the possibilty of them asking us to help, as a form of 'early inheritance' - but as Mr S and I are only in our 60s we will have to say no as we don't know what our own future needs will be.

Yes, it was jolly nice for a pair of first time buyers to be able to 'afford' a brand new 4 bed/2 bath/study house, but I'm dreading the next few months.

RelievedSheff

Silvertabby said:

I know this won't apply in all HTB cases - but my niece and her husband are already starting to panic.  They have just a few months to go before their 5 year 'free' loan expires - at which point they don't expect to be able to re-mortgage to cover the loan because their house hasn't risen in value, and they know that they will struggle to meet the HTB payments.

Bank of mum and dad probably won't be able to help - they took out some form of equity release to give their daughter and husband their 'own' deposit.  To be honest, I'm dreading the possibilty of them asking us to help, as a form of 'early inheritance' - but as Mr S and I are only in our 60s we will have to say no as we don't know what our own future needs will be.

Yes, it was jolly nice for a pair of first time buyers to be able to 'afford' a brand new 4 bed/2 bath/study house, but I'm dreading the next few months.

They must have seriously stretched themselves if they can't afford the HTB Loan repayment!!

AdrianC

princeofpounds said:
This is more what I am talking about. Take for example the link below to a stock photo 'aerial view of a typical german suburb'. This is not cherry-picked - I could have given you countless French, Dutch or Belgian equivalents. Reasonably dense, but plenty of detached houses with garden space and green streets. Variation in architecture, but some economies of scale are achieved by following typical patterns; your house may be identical to one on a different street, but not your neighbours.

Look historically...

Virtually every city across Northern continental Europe was heavily redeveloped during the 50s and 60s. I wonder why...? And one thing's for sure - it wasn't done onesy-twosy by self-builders.

The key is that land is more easily developable at the edges of suburbs and semi-rural villages.

Now look at population densities. BTW, Germany has about 50% home ownership.

Arable land on the southern outskirts of Birmingham costs roughly £8k an acre (Farmer's Weekly, 2015, so maybe a touch higher now, this is just an illustration). The very same land with planning permission is worth about £1m an acre.

We need to bring that 250k for a quarter acre plot closer to the 2k it would cost if there were no restrictions on building (obviously the 'real' value in an unrestricted market would be somewhere in-between, but on the lower side given the relative sizes of the two markets for developable and non-developable land). That is how you solve the housing affordability problem, at root.

Minor issue. Most remaining farmland is simply not in the places where you want homes.

Our village NDP has land allocated for development - about a dozen houses between them. Nobody wants to build on them, because the builds simply will not be profitable.

If people can't bridge the construction period with their own resources (most stay with family or rent for a year) then local housebuilders will often finance the developments themselves.

Sorry, I thought developers building estates were a bad thing? I already said several times that's what happens around here.

Hit the city, and you get big developments, sure - there's a 460-house development nearing completion on one side of the nearest city to me. But there's also small companies building 5-, 10-, 15-, 20-house developments in the city and the larger towns. Out in the smaller towns and villages, they get as big as 20-odd properties max. And they're slow to sell.

A fine example from RM...
https://www.rightmove.co.uk/properties/94066940#/

That's five minutes from a motorway junction, 15 miles from Hereford, Gloucester or Worcester, 30 miles from the Brum ring m'way network, an hour to Bristol or Swindon - and those 130m2 4-bed houses on the edge of a small village in beautiful countryside are <£500k. They were listed in June, and haven't all sold yet.

How about if I told you this was change from £600k, and has been unsold for a couple of years already?

Yes, all of it, not just a flat. Village location, listed, five beds and 320m2 plus half an acre. "Motivated seller".

I used to be more sympathetic to British planning policies before I learnt about how Stalinist they actually are

Who knew planning committees were responsible for tens of millions of deaths of those who dared show the slightest disagreement with them!

Silvertabby

RelievedSheff said:

Silvertabby said:

I know this won't apply in all HTB cases - but my niece and her husband are already starting to panic.  They have just a few months to go before their 5 year 'free' loan expires - at which point they don't expect to be able to re-mortgage to cover the loan because their house hasn't risen in value, and they know that they will struggle to meet the HTB payments.

Bank of mum and dad probably won't be able to help - they took out some form of equity release to give their daughter and husband their 'own' deposit.  To be honest, I'm dreading the possibilty of them asking us to help, as a form of 'early inheritance' - but as Mr S and I are only in our 60s we will have to say no as we don't know what our own future needs will be.

Yes, it was jolly nice for a pair of first time buyers to be able to 'afford' a brand new 4 bed/2 bath/study house, but I'm dreading the next few months.

They must have seriously stretched themselves if they can't afford the HTB Loan repayment!!

It was 'affordable' then.  Meanwhile, 2 children later.....

princeofpounds

AdrianC said:

Virtually every city across Northern continental Europe was heavily redeveloped during the 50s and 60s. I wonder why...? And one thing's for sure - it wasn't done onesy-twosy by self-builders.

Again, I am not talking about cities, but about suburban and semi-rural development. And I'm not talking about development that was done in the 50s and 60s, but what is being done now (or rather, the 90s, 00s - the period where I lived in the areas I'm talking about, so I have first-hand familiarity with all this).

AdrianC said:

Now look at population densities. BTW, Germany has about 50% home ownership.

Population density of the UK - 275 people/sqkm. Germany 240, France is lower at 120, Belgium and the Netherlands higher at 380 and 511 respective. England specifically is 475, but just picking England would be like just picking, I don't know, Ile-de-France in France (1022 in case you were wondering).

The density issue is a bit of a myth. 

AdrianC said:

Minor issue. Most remaining farmland is simply not in the places where you want homes.

That's just nonsense, as anyone who has driven through the home counties would know.

AdrianC said:

Sorry, I thought developers building estates were a bad thing? I already said several times that's what happens around here.

No. The dominance of the big developers we have in the UK as a result of the planning system is a bad thing. I want more developers to be able to exist - more competition, more incentive to generate value from building a quality housing product, rather than generating most value through mastering the byzantine arts of the planning system and the building really only being a necessary step to monetise the planning gains.

The two examples of housing you give are nice enough from a superficial photo, I'll grant you that. But I'm not sure what you are trying to demonstrate with them, except that maybe the housing supply crisis is not so acute in a rural location in the Malvern Hills near the Welsh borders. I don't think anyone is going to be surprised by that. Yes, as you get towards Wales or parts of the North land pricing is less of an issue - local wages and productivity are more of a problem.  

AdrianC said:

I used to be more sympathetic to British planning policies before I learnt about how Stalinist they actually are

Who knew planning committees were responsible for tens of millions of deaths of those who dared show the slightest disagreement with them!

Ha, well I take your point, but I mean Stalinist in the state-driven economic planning sense, which is a valid (if less common) use of the descriptor. My local area has a planning policy based on a local plan that confidently predicts a 'need' for 24 houses in 2027 based on a formula that generates all sorts of other absurd predictions, and all the planning decisions about zone land fot development are driven at some level by this nonsense. If they actually allowed a few of the fields to be built on, you'd be able to sell 2400 houses in no time at all. 

AdrianC

princeofpounds said:

AdrianC said:

Now look at population densities. BTW, Germany has about 50% home ownership.

Population density of the UK - 275 people/sqkm. Germany 240, France is lower at 120, Belgium and the Netherlands higher at 380 and 511 respective. England specifically is 475, but just picking England would be like just picking, I don't know, Ile-de-France in France (1022 in case you were wondering).

The density issue is a bit of a myth. 

No, picking the home counties would be like picking Ile-de-France.
Have you ever been to Northumberland or Cornwall or the Welsh Borders or Cumbria or...?
Herefordshire - 2,200km2, 190k people.
Hertfordshire - 1,650km2, 1.2m people.

IdF - 12,000km2., 12.3m pop'n.
Home counties - 17,000km2, 18.25m pop'n = 1075/km2.
Or, Germany... North Rhine-Westphalia - 34,000km2, 18m pop'n = 530/km2
All the most populous regions of their countries, heavily urbanised and industrialised, and all roughly similar population.
For comparison... Belgium - 30,000km2, 11m pop'n. NL - 41,000km2, 18m pop'n.