Thursday, Sep 10, 2009
Passing the Buck (pun intented)
Citywire: House builder heralds the end of rabbit hutch Britain
House builder Redrow is shifting its focus back to building family homes and away from city centre blocks. The group remains confident about its outlook despite reporting a full year pre-tax loss from trading operations before exceptionals of £44.2 million, down from a £65.5 million profit the year before. Steve Morgan who returned to the company as chairman earlier this year said the group's original business model been focused on building family homes and that is where his expertise is - which is fortunate since he believes increasing numbers of people are looking to invest in this type of property.
Posted by jack c @ 10:35 AM (840 views) Add Comment
16 Comments
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1. fancypants said...
Good news for a number of reasons.
2. mark said...
even their family homes are not that big, pretty small dimensions for rooms, I have a friend who owns the exec version of a redrow, it is smaller that a 1930's semi, postage stamp garden your local estate agent would describe as "large gardens, possible acreage"
3. doomwatch said...
In recent years new "family homes" have been build on "garden grabbed" minimal plots, giving rise to the 3 story "town house" and
very little garden for your money. I hope this changes, but I doubt it.
4. mark wadsworth said...
I wish people would stop blaming house builders or buyers of new homes for "rabbit hutch Britain". It's the NIMBYs and the worshippers of The Hallowed Greenbelt who enforce this*, in an unholy alliance with the Greenies. The reason that houses and gardens were bigger in the 1930s was because they were much more relaxed about new construction.
* "My house is part of the fabric of the town/village. New housing is urban sprawl."
5. drewster said...
The uniquely British way of advertising property by number of bedrooms, instead of by square meters (or square feet), surely must take a lot of the blame. Until this changes, new-builds will continue to have tiny rooms.
6. Jayk said...
Doesn't mean anything of the sort. "Family homes" built these days still have tiny rooms, tight stairwells and miniscule, overlooked gardens. My brother's new build has rooms so small that if you put a bed in one of the bedrooms you have not enough room left in which to open the built-in wardrobe doors. Fortunately he uses it as a storage room so hasn't had to take the doors off, as others no doubt have had to do.
And a friend paid 400k for a "luxury" 6-bed home on a new estate in Guildford. The houses are so close together that if she opens her bathroom window all the way she HITS next doors' house! And she can't fit her Audi A4 in the "garage". Well, she can, so long as she parks within 1cm of the back wall and exits the vehicle through the sunroof.....
7. mark said...
MW
your argument does not stand up
developers want to max profits per acre, this shows in many areas, including the USA (loads of land), whenever we have a boom houses shrink in size, lower quality construction, higher prices, whilst there is an issue with greenbelt, it seems there is one law for big companies and another for local people, i have seen huge sites on greenbelt, supermarkets, distribution centres, etc
the biggest problem is greed, the second issue is incompetent planning depts in local councils and councillors who have no clue whatsoever, example a house near me was refused permission, the guy fought for 5 years with the help of local residents, eventually the local council gave him permission, just after he completed the build a large supermarket was given permission to build less than 1/2 a mile from this guys house part of the development on green belt... why?
I have two reasons for it.
1) Planners are jealous of anything the public might have.
2) The back handers and/ore the power supermarkets have.
correct me if I am wrong ..
8. mark wadsworth said...
@ Mark "your argument does not stand up ...I have two reasons for it.
1) Planners are jealous of anything the public might have.
2) The back handers and/or the power supermarkets have.
correct me if I am wrong .."
Sure, there's a large element of 1 and 2, but we can look at this in terms of logic, historical precedent or other countries.
Logic says, if we are far more generous with planning permission, more and bigger houses will be built - the cost of land = the value of planning permission = scarcity value. For a given total cost of house, the less you pay for land/planning permission, you can afford a bigger garden or a bigger house or both.
Historical precedent (i.e. the UK between 1920s and 1960s) says that if you build more houses, more council houses and have quasi LVT (in the form of Schedule A and Domestic Rates) house prices will be low and stable.
Or we can look at the USA. East and West coasts have strict planning laws (not nearly as strict as UK) and they have the smallest houses, more flats and had a big property price bubble. The bit in the middle has little or no planning restrictions and they have bigger gardens, bigger houses and had no price bubble whatsoever.
9. mark said...
Nevada is mid west they have one of the biggest bubbles??
New England has some huge properties for excellent prices
are you just comparing cities?
FL has some great properties for great prices with decent lots, so perhaps a little to general
NV has very strict planning and land management, yet they don't many flats, in comparison to say new york which is not really suffering the bubble on prices as much.
10. ontheotherhand said...
Have a look at swing a cat where it says our new dwellings are the smallest in Europe at 76m2.
http://www.swingacat.info/facts_figures.php
11. mark wadsworth said...
Mark: "Nevada is mid west they have one of the biggest bubbles?? ... NV has very strict planning and land management..."
Don't ask me for precise details of which states have strict planning laws and which don't (I read the article months ago, but it all stacked up) but your above statements prove exactly what I was saying. Houston apparently has no planning or zoning laws whatsoever, tens of thousands of people moved there after Hurricane Katrina, they built a load more houses and just got on with their lives, there was no price bubble.
12. mark said...
MW
we will both beg to differ, because there are many central states with big problems..
13. mark wadsworth said...
@ Mark, Here's an article (with links to other articles) on the difference between Flatland and The Zoned Zone.
14. drewster said...
@Mark x2
Regarding which cities had the worst bubbles, I'm afraid it's not as simple as coastal / inland. The table below is taken from the latest Case-Shiller index (June 2009), it shows Peak-to-Trough price falls for 20 major US cities.
54.3% Las Vegas
48.5% Miami
46.1% San Francisco
45.3% Detroit
42.3% San Diego
41.9% Los Angeles
41.1% Tampa
36.4% Minneapolis
33.9% Washington
27.5% Chicago
23.0% Atlanta
22.5% Seattle
21.6% Cleveland
21.3% Portland (OR)
21.0% New York
20.1% Boston
14.3% Denver
12.7% Charlotte
11.2% Dallas
San Francisco is a tightly confined land area, and it had one of the worst bubbles. However New York and Boston are also tightly confined land areas, yet they escaped fairly lightly. Las Vegas and Phoenix (sprawling flat areas) also had huge bubbles.
I know that Portland (OR) has a greenbelt and they are quite protective of it. Nevertheless the bubble there was fairly mild. (Caveat: I don't know what restrictions, if any, apply within the greenbelt).
Given the figures, I'm at a loss to explain the factors at play here. Any thoughts?
[Source data: S&P Case Shiller Index]
15. drewster said...
Mark W, re Flatland and the Zoned Zone:
That article is a year old. The figures are all worse now, but the cities are still in almost the same order of severity.
There are too many exceptions to the Flatland / Zoned Zone logic. Phoenix, Las Vegas, Tampa, Minneapolis - these are flatland cities with huge bubbles. Boston, New York, Portland - these are zoned cities with lesser bubbles.
Closer to home, we're all familiar with the bubble in Spain. Thanks to lax planning rules, the Spanish built four times more houses than any other country in Europe. Much of it was built in coastal areas and sold to overseas investors; a lot was also built in the suburbs of major cities, and sold to domestic investors. Absence of planning restrictions didn't help them much.
Could speculation be the key? Were a lot of people buying property in Las Vegas or Miami because they felt it was a one-way bet?
Why was Dallas spared? Could it be because Texas has no personal income tax but one of the highest property tax rates? Did the fear of tax deter speculators? You can't buy-to-flip if you're paying thousands of dollars a year in tax.
16. mark wadsworth said...
Drewster, Spain and Ireland's property bubbles were more to do with the swift cut in interest rates after they joined the Euro - once the bubble got going it was hard to stop.
The position in the USA is of course more nuanced that just 'flatland/zoned zone' but there is a correlation. Mark (above) said that Nevada had strict planning laws, which I took at face value. No doubt there is also a correlation with low/high property taxes, as well as how well the economy is doing. It is difficult to control for all these variables but that does not mean that they do not have an impact. A bit like the arguments we have here about the impact of unemployment on house prices.