Just like Elvis still being alive, the argument that housebuilders landbank just wont go away.
The Shelter research was addressed in a series of tweets from Matthew Spry of Lichfields pointing out the simple realities that :
- It is inappropriate to compare consents in one year to completions in another. It can often take years to get through the Reserved Matters and pre-commencement conditions process;
- Large sites may get consented in one year but they certainly don’t get completed in full within the next year;
- The public sector is sitting on over 100,000 unbuilt consents, demonstrating the delays that everyone faces – nobody’s fault;
- Lapse rates are a fact of life. Markets, ownerships and landowner aspirations do change. Nevertheless a negligible statistical impact outside of London anyhow.
In terms of the Aussie research, citing this as evidence of UK housebuilders landbanking seems to be a new high in straw clutching.
Firstly the report itself, whilst extremely interesting, is crystal clear that it relates only to an Australian situation based on Australian evidence. Indeed the only UK references are an academic paper from 2009 and the various Government reports all of which have confirmed that UK housebuilders do NOT landbank.
The more relevant, recent and robust UK reports on land pipelines, by Lichfields (here) and CWE Economics (here) are not referenced. Quite understandable as they relate to the UK rather than Australia. Both these reports confirm that consented land pipelines in the UK planning system are actually way too low to deliver 300,000 homes a year. A point recognised by former Housing Minister Kit Malthouse who called for 5m homes to be in the planning system.
Secondly the report addresses relates to a specific and different question, namely have delays in the Aussie planning process caused Australian house prices to be so high? As part of that, the report considers delivery rates and absorption. All good stuff but of little relevance as to whether UK housebuilders landbank.
Thirdly the report seems to assume that an immediate landbank is similar to a strategic landbank. In the UK however they are completely different, with there being absolutely no certainty that the plots within a housebuilder’s strategic landbank will ever be developed, let alone quickly.
The key similarity between an immediate (consented) and strategic landbank is that both are being promoted to a site start as fast as possible by the housebuilder. One has certainty of delivery, the other does not.
The report also addresses a question as to whether, in Australia, land is held back, or sales rates held back, to capitalise upon market gains. Hardly relevant in the UK with our flat or falling house prices. No possibility of Barratt buying land (our biggest investment) and then sitting on it, incurring huge holding costs, in order to sell homes later at the same price or lower!
Ahhh but some have also used the report to argue that housebuilders deliberately slow build rates to protect profit. The reality is that house prices are set by the second hand market prices, which then set the price of land via the residual approach. If Barratt sells at below the assumptions at the time of purchase then obviously we risk making a loss. Therefore, like every retailer of every product in the UK, we motivate our sales teams to sell faster, at the right price, compared to the rest of the market.
One thing is sure, if there are 3 sites and 6 outlets in a local market, new homes will sell faster than if there is one site and one outlet. The impact may be slower and lower prices in the second hand market, but hey, isn’t that what policy is trying to achieve?