Philip Barnes – Blog

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If there is one thing for sure with Brexit – it’s way too early to predict its longer-term impact with any certainty.

So every article and TV programme confirming precisely what will happen to house prices and housing delivery over the next two or three years must be viewed with a significant pinch of salt.

Why such lack of clarity? Because a house purchase is the biggest investment anyone can make and nobody will make it unless they are feeling confident and secure. It’s about customer sentiment – something which will vary from region to region, from town to town and from family to family. For most people (especially the 52%) sentiment is currently good, as reflected in housebuilder trading.

At Barratt we believe the market fundamentals are strong and we want to increase our housing output. There is much positive news recently. Indeed our own measurements of (a) footfall into showhomes, (b) plot reservations and (c) completed sales are positive compared to last year.

So what are we doing? In simple terms its “business as usual”. We remain committed to or strategy of controlled volume growth which has seen us increase output by over 50% in the last five years and by over 15% in the last two. Over the next few years we will work harder than ever to maximise sales rates and delivery on the sites we have. Customer sentiment is strong  and we have a good supply of consents to draw down as quickly as we can.

In terms of land and planning we spent over £1bn last year. Our aim is to buy at least as much land this year and next. After all land is our lifeblood and if we wish to grow we need more of our raw material. But we won’t simply ignore the cautious economic forecasts for the post-Brexit period. We will continue to be disciplined as we know from previous experience in 2008 that shareholders will have no sympathy if we have to try and justify over-paying for sites which require us to sell homes through the economic cycle.

So when you read about ‘housebuilder jitters’ remember that Barratt is committed to growing volume and our discipline will remain. We will continue to buy land, build homes and sell them to support our strategy of controlled growth.  We will need landowners and planners to be similarly positive and proactive.

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Or go to the Doctors? Or drive down a congested road? Me neither.

But returning from the party conferences over the last two weeks I was left with a sense that many people seem to think that new homes, in themselves, create infrastructure demands rather than the population growth they are there to serve.

Those of us who work in housing delivery know that housebuilders are only allowed to build an amount of houses equating to the projected local population growth which will be happening anyway. We pray to the God of OAN.

Building homes doesn’t create population growth but in a civilised society new homes are needed to accommodate said projected population growth. It is the population growth which creates the infrastructure pressures not the act of laying some mortar on top of a brick.

When children ask, “Mummy how are babies made?” no parent has ever answered, “well darling, firstly someone builds a house”.

Moving on from the slight facetiousness three important points are raised.

  1. Clearly new housing can influence patterns of migration and, whilst the vast majority of our customers come from within 5 miles of the site, Barratt recognises the need to better align new infrastructure provision and new homes provision.
  2. CIL is the current approach to linking infrastructure investment to housing investment. It is a gigantic mess. There is a review underway. Will it ever be published? Will it ever be acted upon? It is certainly needed.
  3. We housebuilders need to raise our game on this point. Doctors’ surgeries, train carriageways and local roads are going to get busier due to population growth which is going to happen anyhow. Building new homes is often the only way to secure improved or new infrastructure and facilities.

New homes should be regarded as the potential solution to local infrastructure issues, and definitely not the cause.  Yet this week has reminded me we are not getting this message across.

Mea culpa and note to self.







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Once again we have more media articles this week which target housebuilders and developers for landbanking consents and once again, from a Barratt perspective, it is a picture I simply don’t recognise.

This time the criticisms seem to be in two parts. Firstly that we don’t build out the consents that we secure fast enough and secondly that we don’t build faster than we can sell.


So what does the Barratt data tell us? In FY15 we secured planning consent for 17,092 units. This compares with completion figures of 16,447 in FY15 and 17,319 in FY16. I haven’t the greatest eyesight in the world but I simply don’t see any evidence of landbanking there. If there was we would be taking action because, as a return-on-capital business, we need to start building and selling on all of our consented sites as quick as possible. Indeed we are quite proud of the fact that despite significant labour market shortages and difficulties in securing some key materials, we are maintaining our actual output broadly in line with our planning approval and budget projections.

Build and sales rates

And building faster than we can sell? Not really sure how we could do this given the scale of costs and risks in selling houses. Our aim is to have the fastest sales rate as possible but our business model does not allow us to build more homes than local customers to sell to. Selling prices are set by our main competitor (the second-hand market) which, given the residual land value model, determines the price we pay for land. Whilst in theory we could cut selling prices to accommodate a faster build but that would simply mean an unprofitable development – a highly unattractive prospect for our shareholders and the loss of capital to invest in other sites. Of course the real issue and opportunity is to broaden the supply base of those building new homes as covered in a previous blog HERE. Barratt, as a volume housebuilder has done its bit with a 53% increase in volume over the last 5 years but we need help.


Other providers, large and small, public and private, also need to step up. In my view the sites which allow those with patient capital to provide serviced sites in good locations to housebuilders are a great opportunity. Our JVs with Places for People in MK and with Newcastle City Council in Scotswood are great examples. Again I would stress that housebuilders tend to be return on capital businesses without the benefit of such patient capital. We sell what we build so have nothing to lend against.

Draft Local Plans

And my final point – what about local plans delays? Barratt alone currently has 20,000 units allocated in draft plans awaiting adoption. These are sites where we are desperate to submit a planning application and start building. However we can’t because they are currently locked up awaiting adoption of the local plan. Many (by no means all) of these plans are severely delayed. Therefore sites long accepted as being developable are being held up year after year. To us, that perhaps ought to be regarded as landbanking…….

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Lots of comment recently about the need for bungalows and how naughty and greedy housebuilders are by not providing them. So what’s the position from our perspective?


As is often the case is comes down to land and policy. Land is our key raw material and we have to compete extremely hard for it. And as we all know consented housing land is a scarce resource, albeit slightly less so thanks to NPPF.

Barratt wins the competition for land when the land value we bid (forecast site sales revenue minus the costs) is higher than the competition. Unfortunately bungalows tend to take up broadly the same land area and cost as a house but generate far less revenue due to the reduced floorspace and rooms per plot.

As result if we have 10 bungalows on part of a site where our competitors have 10 houses we have broadly similar costs but dramatically less floorspace and forecast revenues. Result = we generate a lower land value and the landowner does not sell to us the site. So no bungalows.


Easy answer though.

If the LA produces the following:

  • demonstrable local need for bungalows,
  • reflected in the SHMA,
  • set down in policy, following public examination of need and viability
  • backed up by a site development brief requiring 10 bungalows.

Then competing housebuilders will work up land bids which reflects the need for 10 bungalows. Whoever wins, the 10 bungalows get built.

This is not one of the things that keep housebuilders awake at night. If we are required to sell bungalows by policy we will buy land on that basis and build them. They generally tend to sell OK when we have to provide them by policy – the issue is simply that they don’t generate a strong enough land value when bidding for a site where there is no policy requirement in place.


One myth that needs busting is that the ageing population means there is a huge unfulfilled demand for bungalows and that affluent downsizers will not leave the family home unless they can get one.

The reality is that some want a bungalow but many others prefer a good spec apartment in a great location. Higher ceilings, bigger rooms, high quality taps and kitchen units, independent shops and cafes nearby. Maybe a Waitrose. We are developing products for this market and the initial signs are, that in the right locations, they can work both in terms of generating a land value to win the site and then also delivering a decent sales rate.

Maybe planners and landowners can help us address these customer demands??




One of the commonly cited reasons for new home delivery undershooting the level of need is the underperformance of the larger housebuilders. This is simply not the case. In Barratt our output in FY16 was 17,319, up 53% on just 4 years ago. We are doing our bit. Not just increasing volume but broadening the house types and locations. More smaller products for first time buyers and more towns where we haven’t built for a while.  Our S106 Agreements deliver more affordable homes than any other organisation in the UK.

The real problems are the limited number of organisations who actually build new homes and the limited number of extra sales outlets.

Regional Builders

So how can we broaden the supply base with more smaller builders and more output from housing associations? And what has been going wrong?

There is no doubt there are more regional builders out there looking for sites. Typically they are often relatively new companies, with say 10 – 20 staff.  They have secured development funding and are looking for sites of say 20 – 80 units. Generally looking for consented sites but, as they grow then looking for subject-to-planning deals with landowners. With more support from Government (expected in the Autumn Statement) it seems clear we will see more new regional firms and existing ones growing.

Small Builders

For the much smaller builders (firms of c3-10 people, plus a local supply chain of tradesmen) there is perhaps less optimism in terms of major inroads into the build-for-sale market. They currently tend to focus on focus on residential/commercial extensions or one-off ‘grand designs’ commissions from clients who have secured their own consents. There is usually not enough profit to offset the risks associated with buying sites, securing consent and selling homes, even if development funding could be secured.

The problem is a lack of supply of consented sites to these smaller builders.

There are no land promoters out there securing consents and selling them on to the small builders. How could there be? For two houses at £250k (above the UK average selling price) the consented land value may be c£200k. If a promoter gets a 20% that means £40k. Completely unviable given the costs and complexity of the UK land market and planning process.

So what if the small builder tried to secure the land then get the planning consent themself. Well again for 2 plots at £500k GDV, the maths might work out at c£200k for the build, £100k for the land and the unconsented planning costs at £50k leaving a profit of £150k. That sounds feasible until you consider the builder needs to carry planning risks and delay, staff costs during the whole process, interest charges on finance and, above all, the sales risks and costs. Whilst you can play around with the maths (and every deal is different) the reality is that small speculative housebuilding projects are highly risky.

The small builders will continue to act as contractors for ‘grand designs’ or part of the supply chain to regional builders. Both these sectors should increase their volume of the coming years but if the additionality is above 20,000 per year we will be doing really well.

Councils and Housing Associations

Others will comment better on the potential for LAs to get back in the game of building social housing. Two things are clear, lending conditions look better than they have done in a generation and trends point to increased demand for a decent rented product.

For housing associations it will all be about land supply and risk appetite. Securing land is competitive, risky and expensive. The potential to over-pay causing really painful future losses is massive. However, housing associations can bring huge commercial strengths to the process of volume delivery of both rented and for-sale products. In particular, a longer term funding model and very cheap lending secured against good assets.

These commercial attributes offer significant potential for major volume increases from the housing association sector. If there is willingness and trust on both sides, there is perhaps even greater potential for volume uplift through housing associations linking these attributes to the land, planning, sales and marketing skills within volume housebuilders.

Already, exciting innovative JVs are in play for example our JV with Places for People (PFP) at Brooklands in Milton Keynes. Delivering new homes at pace. PFP put in the land and infrastructure then we put in the build and sale. Simple profit share.

Maybe we will see more.


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Everyone agrees we need to increase housing output on brownfield sites.  However the definition of previously developed land (PDL) aimed at achieving this has been largely unchanged since the first consultation draft on PPG3 back in the late 90s. The only substantive amendment has been to weaken the policy as it relates to large gardens in order to avoid garden grabbing.

The time has perhaps now come to amend the current definition of PDL in order to drive more output from brownfield sources. With 20 years of policy encouraging brownfield sites the ‘easier’ sites have gone. In many areas only the unviable, multi-ownership, technically complex sites in the weaker market locations are left. Housing under supply has grown and its disastrous consequences means that we should now explore new sources of brownfield supply.

The first port of call should be those sites which the public view as brownfield but policy does not. Namely the vacant or underused garden centres, glasshouses and golf courses which are clearly capable of accommodating new homes. With homelessness rising and  a million too few new homes since 2000 the planning system no longer has the luxury of regarding such sites as greenfield and unsuitable for redevelopment.

For garden centres the economic and planning opportunity is obvious. As the large DIY stores and supermarkets have entered the market for plants and garden equipment the country has been left with countless vacant or financially unsustainable garden centres and nurseries. Most look the same – large ugly aging structures accommodating a mix of growing and retail operations. And mostly located close to our urban areas and making no contribution to the openness of the Green Belt.

But unfortunately garden centres are classified as a horticultural operation and therefore as greenfield. Whilst case-law has established that those which are predominantly retail operations (with ancillary growing) can be regarded as brownfield the simple reality is that the planning position is at best complex and acts as a disincentive for developers. Indeed some local plans actually seek to protect such uses from redevelopment in some forlorn hope that such an allocation will somehow stem the economic tide.

If the NPPG brownfield land definition could be brought updated to make clear that such uses can be regarded as brownfield this would open up the prospect of a range of ugly densely developed sites coming forward for much-needed well designed homes and open spaces.

Similarly global warming and reduced shipping costs has dramatically affected the UK glasshouse industry. Many are now vacant or financially unsustainable. Whilst some are in remote locations unsuitable for new homes, many are located close to urban areas and offering opportunities for environmental enhancement through redevelopment.

Another sector suffering from structural economic decline is golf. As evidenced by a 20% decline in golf club membership between 2004-13 in England.

Again most are located close to our urban areas where the housing needs are greatest. They are usually ecological deserts with little or no public access. Many are slowly dying due to lack of investment and falling membership rolls. Perhaps the planning system should be working positively with Sport England and the golf industry bodies to define policies which ensure a positive future for redundant or unviable golf courses. Perhaps new country parks, new facilities for other sports, or garden villages. Or all three.

If the local planners and the golf course owners feel the course could have a viable future with new investment then maybe a small housing development on the brownfield part of the course could help provide that investment. We planners need to be proactive and positive in addressing the needs of the next generation of golfers and homeowners and renters.

Three huge potential sources of future housing supply. All housebuilders need is some positive, consistent national and local planning policy. If we get that we will aim to do the rest.

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MIPIM is always a brilliant opportunity to take in hundreds of different views on a vast array of different subjects. This “opinion hoovering” enabled me to finally clarify in my own mind what is going on with land banking. It has long been a cause of curiosity because I know that Barratt do not land bank but there is clearly an issue with some consented housing sites not coming forward fast enough.

So what were the “eureka” realisations?

1. Firstly that land banking means different things to different people. For example a local authority member at MIPIM cited an example of land banking to me. When we delved into the detail it was a site where outline consent was granted a year ago and “nothing has happened”. The reality was that:

  • the outline permission was secured by a land promoter
  • after outline consent the site was marketed and sold to a builder
  • reserved matters consent is still to be granted
  • in fact, it may well be another 6-12 months before development commences – with everyone working as fast as they can to bring the site forward.

That isn’t land banking in my book

2. Secondly, another local authority member felt that if builders are not building out a site as fast as technically possible – that is also land banking.   The reality is that housebuilders, as return-on-capital businesses are not able to build our products at a pace faster than our customers will purchase them, at the market value. We could in theory cut prices to speed up sales but as we have based our land purchase price on the estimated market values so we don’t have this option in practice. Similarly if we put lower sales values into our development appraisals when buying land we would simply be uncompetitive in the land market – our raw material.

In simple terms we build as fast as we can given the market in front of us and in recent years our sales rate has significantly increased. Across the Group we are now selling at 0.66 sales per week per site on average and faster in the stronger market areas.

3. It seems clear to me that housebuilders, LAs and others have different views on what land banking actually is. To me it’s people getting a planning consent and then deliberately either:

a) building out a site at a deliberately slow rate in the hope that rising house prices will increase site revenue, or,
b) delaying the start of a development in the hope that land values and/or house prices rise

4. In relation to (a) I have already explained that Barratt is a return on capital business and we build and sell as fast as we can. Indeed we are currently working with the Government and others on how we can further speed up build and sale without losing competitive advantage

5. In relation to (b) the eureka moment was a discussion with a planning consultant specialising in London. He revealed that:

  • approximately 80% of current workload is housing
  • it splits c80-20 with c80% for landowners/investors and c20% for housing developers
  • for the 20% of work done for housebuilders, the project always proceeds to a site start when consent is granted
  • for the 80% of work done for others the site does not then proceed to a site start in c50% of cases

Clearly a sample size of precisely one but it perhaps does show that there could be a geographical dimension to the “land banking” issue. Namely far more landowners, investors and speculators in the London land market some of whom appear to be using the planning consent for valuation purposes rather than construction purposes.

So my MIPIM 2016 sum up:

  1. Hopefully a few more people realised that Barratt does not land bank, BUT this relies on our definition of land banking as described in (3) above
  2. In terms of “our” definition of land banking there does appear to be an issue in London
  3. For those who think an unbuilt site which secured outline consent 12 months ago is “land banked” then all we can do is respectfully disagree. And the same for those who think land banking is building at a pace unrelated to customer demand

Final point would be my continuing frustrations as to how many people who cite the 475,000 unstarted consents figure without realising that:

  • many of these consented units are on sites where there remains a requirement to discharge pre-commencement conditions so actually can’t be started yet, and,
  • for a site which has started but has say 500 units left to build those 500 units form part of the larger (unstarted) figure.