The one thing that will kick start housebuilding is certainty
The Chancellor’s Autumn Statement gave some crumbs of comfort to some first time buyers with the Stamp Duty changes, but it was not enough says Richard Werth, CEO of Troy Homes. He says that housebuilders are in a vacuum of uncertainty over the big ticket promises.
Richard explains: “The changes in Stamp Duty will certainly help first time buyers up to the £500,000 threshold. But, this change is unlikely to benefit the new homes’ landscape in the longer term.
“The main problems facing housebuilders are fourfold: uncertainty; lack of follow through on government announcements; the log jam created by delays in planning, including amendments to the National Planning Policy Framework (NPPF) and chronic shortage of skilled labour.
“The government has pledged that there will be one million new homes built by 2020, with a target of 300,000 new homes every year from 2025 onwards. To achieve this target, developers will need to increase production by over 30%. Housebuilders do not build for the government, they build primarily for the private sector. If we can’t sell, we won’t build. And, equally, if we cannot get land with an implementable planning permission, we do not have an active pipeline. These very simple truths lie at the heart of the problems housebuilders are currently facing and why the target of over 300,000 new homes a year is unlikely to be achieved.”
He continues: “Most developers were cautiously optimistic when Mrs May announced that £10 billion is to be invested in Help to Buy at their Party Conference in September as this scheme has been very successful; particularly with the recent changes made for London and the South East.
“Moreover, Help to Buy ends in around 36 months, so we need to know what will replace it as we plan some years in advance, especially with larger sites. Help to Buy, contributes to more than 30% of all new home sales. So, without it, there will be far fewer buyers and developers will not continue to remain positive.
“Government announcements that are not followed through are worse than doing nothing at all as they create a climate of uncertainty. Uncertainty is the death knell for housing because lenders and funders do not like it, making it very hard for builders to get capital investment and for buyers to get mortgages.”
‘Land banking’ was also referenced by The Chancellor in his Statement. What he said was misleading. Currently, planning delays have had a major knock-on effect on ensuring that sites can be developed. ‘Land banking’ is about getting sites ready for development and infrastructure built which includes clearing the huge number of planning conditions that come with almost every permission. A lack of qualified planners and poor resources in many Councils’ planning departments are also huge factors in how quickly we can build more homes.”
It sounds like a never ending circle with few answers. But, says Mr Werth, the solutions are relatively simple: “The two things that will kick start housebuilding are: certainty and delivery.
“The key questions that need answering are: When will we get planning clarity? When will we get details on the promised extra £15billions announced by Mrs May, including the help needed for SME developers? What will replace Help to Buy? And finally, what will the UK’s post-Brexit immigration policy be? Many of our skilled ‘trades’ currently come from Europe, because there are not enough being trained in the UK.”
In conclusion, Richard says: “Troy Homes is highly successful because we know our market, we get our pricing right, we have well trained staff and partners to advise buyers and we build top quality homes. Would we build more homes if we could? Yes, of course. But, only if we can get planning permission on affordable sites and have confidence that we can sell our new homes. If the government wants more homes it needs to ensure that developers and home buyers have more certainty or they will not commit to substantial investments.”