Yesterday I presented a paper on Viability in Planning to the RICS North East CPD day. A number of the sessions touched on housing and below is my short and slightly random 20 Point sum up.
Please note they are the views of various others who also spoke at the event.
- Without a “shadow of doubt” housing delivery is top of political agenda.
- Systemic regional variations in the market – north / south divide. Regional variations are projected to increase in next 10 years.
- Home ownership is out of reach for FTBs and PM determined to address.
- Raft of recent Government market interventions but none have had a structural impact on either mortgage availability or housing delivery.
- Net lending has “drastically” reduced since 2007. No current prospect of structural upward change. Although some recent green shoots – new products at 4%rate/90% deposit. Outcome from recent Government lending initiatives.
- Price falls everywhere except prime central London. Current prices at 2003 levels.
- Transactions halved since 07 and currently 35% below 50 year average.
- Barratt Fulham scheme – 60 sold in a week. Battersea scheme 80 sold in 2 weeks. London is a bubble market – divorced from UK normal market.
- Rental growth outside London is very slow. But solid investment for landlords due to strength of demand.
- Renting is now more accepted amongst younger households especially as home ownership levels are falling like a stone.
- Private rented sector is a key Government focus. Volume builders are entering the sector strongly. Why? – because people are staying in renting accommodation longer. Average tenure lengths increasing. Also quality is better although recognising huge qualitative variations. PRS is heavily focused in SE. Now a bigger sector than social sector in UK.
- Big questions about whether rental control will be introduced. Many feel it will kill the PRS sector if introduced.
- Problem is that PRS is growing by taking units from other sectors rather than building new. Should ease as new players (e.g. Grainger) focus on building new product.
- Huge homelessness problem which can only be addressed by more supply. Massive social issue for UK
- Chronic under supply has caused the housing crisis – not economic or market factors.
- Housebuilders will not/can not build without an exit or viable funding. At present 13, 14, 15% senior debt is killing viability other than where land is purchased cheaply – rare.
- Social Sector is desperate to get into PRS. e.g. Places for People (?) have just bought portfolio of 000s of houses in West Midlands. Currently German and Swedish investors have targeted major investments in UK housing. Agents have been brief to buy 000s of houses usually within M25.
- Supply issue – completions recently increased but starts have recently decreased dampening optimism for 2013.
- Average housing planning application takes 38 weeks – x3 the Government target. Redrow spend more on planning than bricks.
- Simple reason why UK institutions not entering the PRS market – yields not good enough and fear of management. Big progress on both elements though. Ongoing Government support essential.
- Huge problems (and opportunities) for social sector. PWC forecast 1.0 million shortfall info social units in 10 years. With lack of grant and S106 fall off they need to do things differently – particularly in securing finance, buying land and risk management.
- Huge investment opportunities in the North going forward due to shrinking yields in South. Both for BTL and new development.
- There is now an All Property Index which compares residential sector to other commercial sectors. It very clearly shows returns from residential sector have outstripped all other sectors whether looking short term or long term. This is a good time to invest in the delivery of either PRS, owner occupied or social housing – if capital can be secured.
As always comments welcome.