Philip Barnes – Blog


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Lost count of the numbers of times the development sector has provided cast-iron (IMHO) evidence to prove housebuilders do not landbank.

But rather than feel satisfied that the issue seems to be going away the anti-builder brigade seem to just come up with more and more unfounded alternative facts about (a) cartel pricing or (b) gobbling up of smaller competitors.

Cartel pricing

Ref (a) nothing could be further than the truth from my perspective. What I see day in day out is fierce competition amongst large builders to secure land. Based on taking a commercial (and risky) view of the selling prices in the market.  Whatever anyone thinks about house prices (and affordability), they set the price of land.  There is nothing in this week’s house price data which reduces our risks in this regard.

And when we start building and selling, housebuilders act as price takers rather than price setters given that our main competition is the second hand market which comprises c90% of transactions. Housebuilding is a highly speculative and competitive environment and when the market is strong, as now, it drives strong profit performance. In contrast when the economy is weak we get hit first, hardest and for the longest.  We couldn’t pay our shareholders a dividend all the way from 2009 to 2013.  We are trying to manage the risks posed by a potential future downturn.  We sense it will come sometime but just don’t know when.

The idea that big housebuilders somehow act in cahoots in regards to either land prices or unit selling prices lacks any evidence (or logic) and will easily be dispelled by a conversation with any landowner, land promoter or land agent. Such a conversation may yield better insights than relying upon Twitter.


In relation to the consolidation of the industry it is perhaps worth making three points.

Firstly the big builders would be happy to see more smaller builders setting up and being successful and have made this point countless times. Smaller builders operate differently, often with lower operating costs but higher materials costs, and produce a different product. They generally compete more with the local second hand market than with us. They generate transactions and train people which is positive to everyone else in the sector.

A small development of 10 or 20 new homes in a town or village, if successful and well received, can often make it easier for the volume builders to follow on with a larger scheme with more affordable housing.

Secondly I would bow to John Tutte, CEO of Redrow in a recent interview HERE where he makes the point that the recent Redrow acquisition of Radleigh Homes will lead to greater housing delivery not less. Redrow will drive far more units out of the Radleigh operation than Radleigh themselves would have done. When builders acquire other builders it is usually to help drive up volume not to squash it.

And thirdly lets remember this isn’t a housing thing. Look at the consolidation in the car making sector, from over 500 British car makers down to 35, mainly very small niche operations plus a handful of global businesses. And the British high street – now dominated by a few big brands rather than the previous mix of nationals and locals. And try getting a coffee in many places if you don’t like Costa, Nero, or Starbucks.

I don’t recall a Coffee White Paper promoting financial and planning measures to support and develop more local cafes to break a mythical cartel. Albeit I would fully support such a proposal!

So in summary lets remember (and address) the real causes of the lack of diversity in the housing sector. Namely:

  • the ridiculously high entry costs and risks caused by the planning system
  • the lack of bank lending since the global financial crisis.

There are plenty of small sites around – the task is now to help the smaller operators gain access to them.  That starts with positively identifying them in a plan or other planning document and then providing low cost risk-free market access based on planning certainty.

Author: philipbarnesblog

Group Land and Planning Director for Barratt Developments PLC. FRTPI, FRICS

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