A law firm which offers more

Call us: 0113 246 0622

Housebuilding - Positive Signs and Big Challenges Ahead

Comments

After taking a hard hit in the recession, there are now clear signs that Britain's major house builders are back in business having reduced costs and streamlined their operations over the past two years.

After taking a hard hit in the recession, there are now clear signs that Britain's major house builders are back in business having reduced costs and streamlined their operations over the past two years.

Recent sales information show that major players such as Persimmon, Taylor Wimpey, Barratt and Redrow have seen an increase in sales and our experience is that the larger house builders are now once more actively acquiring land for new schemes.

Notwithstanding these positive signs, there remains an undersupply in availability of new housing.  This is evident at both a national and regional level.

As things stand, the major house builders are currently best placed to meet this demand.  Medium sized and small residential developers continue to struggle to get  funding on residential schemes, with lenders having being badly burnt over the past couple of years.

Despite a back-drop of economic challenges this continued undersupply presents opportunities for both house builders and those owning land with potential for residential development.

That said,it is important to remember the housebuilding sector is operating in new market conditions. Both in terms of demand and policy there is a shift away from high density investor driven apartment schemes towards affordable family housing led by the needs of owner occupiers.  Linked with this there are continued high costs associated with the planning process, infrastructure works and construction requirements associated with the move to low carbon emissions.

 Commonly major house builders acquire land by way of options, giving them the right to acquire land within a particular time frame (typically 5-10 years) or by way of conditional contracts (typically conditional on planning).  These deals usually involve the house builders handling planning applications and bearing those costs.

Brownfield sites remain the most likely prospect for residential development.  This may be land which is currently or formerly industrial land. Businesses with land which is now surplus to requirements or that own a site where relocation is an option should consider if the land has potential for residential development.  Prospective sellers should look at the local development plan or where it is not yet finalised look at how they can promote the site for residential development in that plan.This process of planning promotion may well be something a house builder could take forwards as part of a deal for an option of the site.

Finally what is the new government doing to encourage the supply of new homes?  It is early days and budgets are tight.  Funding has previously  been made available through the "Kickstart" fund to enable completion of ongoing schemes but it is unclear about the extent of government funding support for the sector going forwards.So far, the noises coming from the coalition government indicate plans to simplify the planning regime, remove the  bodies responsible for regional housing   targets and return decision making to a local level. Whether this will serve to assist or hold back the number of sites achieving planning permission and addressing the housing shortage  remains to be seen.

If you would like to speak to our property team please contact partners Martin Grange.

This article was featured in The Yorkshire Post - 15 June 2010.