Tuesday, Jun 08, 2010
Reaction to: Latest from the housing minister
Dash 24: Shapps savaged over home ownership aspiration speech
Subsidy junkies the National Landlords Association hit back:
"House prices are still beyond the reach of most people. Across the UK, house prices ballooned by 121% over the last decade. Although 1.4 million people want to buy their own home, 75 per cent cannot afford a mortgage with an 80 per cent loan-to-value.
•We are not building enough houses. Back in 2004, the Government was given the unenviable news that 120,000 new houses would be needed each year by economist Kate Barker. We currently face a shortfall of 150,000 homes built.
•People need mortgages but there aren’t many available unless you have an average of £30,000 for a deposit. Even then a rise in interest rates could spell disaster when it comes to keeping up with mortgage payments."
14 Comments
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1. tenyearstogetmymoneyback said...
•House prices are still beyond the reach of most people. Across the UK, house prices ballooned by 121% over the last decade. Although 1.4 million people want to buy their own home, 75 per cent cannot afford a mortgage with an 80 per cent loan-to-value.
--- Could this be anything to do with Lie to Bet "Investors" pushing up prices by competing with First Time Buyers
•We are not building enough houses. Back in 2004, the Government was given the unenviable news that 120,000 new houses would be needed each year by economist Kate Barker. We currently face a shortfall of 150,000 homes built.
--- Completely true, although this has been to the advantage to anyone with the deeds to a property.
•People need mortgages but there aren’t many available unless you have an average of £30,000 for a deposit. Even then a rise in interest rates could spell disaster when it comes to keeping up with mortgage payments.
--- So if there were no Buy to Let mortgages (which was preety much the case when Labour came to power) there would be more money
for the First Time Buyers. Most importantly there IS only a limited amount of money to go round. If someone saves £100000 it can
only be lent to a FTB or BTLer not both.
2. quiet guy said...
@tenyearstogetmymoneyback
Yes, the NLA's arguments are self serving but I'd give them some credit for their response to Shapps as well.
"Even now, as we claw our way back from a recession caused (at least in part) because of this preoccupation with home ownership, it remains the accepted orthodoxy. And one that the Government has swallowed completely."
3. str 2007 said...
For my ten penny worth you have to live somewhere and it's surely better to purchase that propeerty which will be paid off by retirement than be renting forever.
Where the problem arises is the pressure on housing and recent ridiculous lending that's pushed things up further.
You can build a very nice house for under £100k and for that money detatched (assuming a reasonable number built together.
It's the land they're sitting on which has got ridiculous.
Virtually everyone in this country can afford a house and a piece of land to put it on. What most can't afford is the PLANNING PERMISSION which pushes up the price of the land prbably 10 fold.
This is a quite ridiculous situation and should be sorted out quickly before we sink any further into our own debt.
4. mark wadsworth said...
STR2007: "What most can't afford is the PLANNING PERMISSION which pushes up the price of the land prbably 10 fold."
The cost of the physical land is next to nothing, assuming the base cost is the value of agricultural land, that'd be about £500 for a plot big enough for a house with a nice big back garden, off-street parking etc. Therefore about 99% of the cost of land is the planning, or more pertiently, location x planning permission. Or to use your maths, the PP pushes up the price of land 100 fold (not 10 fold).
5. Jayk said...
I can condense the NLA's view into one short and easy to remember statement:
"House ownership isn't for everyone, it's for BTL investors."
6. Greenmind said...
Uncontrolled development is not a good thing. Planning is important for a number of reasons. Having said that, an increase in new housing supply is needed to keep up with demographic trends. But 90% of the electorate don't feel this need, so it doesn't have political support.
7. str 2007 said...
You're absolutely right Mark, in fact having thought about it, where I live (Southern Hampshire) it's worse than that.
A 1/4 acre plot would cost £3-400k or £1-1.2m per acre and if you took agricultural land at £5000 per acre then you're looking at a 200 fold increase.
This really is quite a bizarre situation when you break it down like this.
Of course there's a chunk of money for infrastructure on a new estate, but if you break that down to what's outside each house that is unlikely to add up to anymore than 20-30% of the build cost for each house or say £20-30k for the road & pavement outside and the various utilities coming in (cable, electric, gas, water etc.
Will people ever wake up I wonder to the amount they are paying for the planning permission element of where they live or where they're going to live.
Maybe it's just the system and always will be.
8. mark wadsworth said...
STR, clearly, if new housing is built, they have to pay for the infrastructure and utility connections etc, but that's construction cost and not land cost.
"Will people ever wake up?"
No of course not, what makes you think that? One of our national mantras is that "Britain is a crowded island" which is a Big Fat Lie.
9. Builder said...
str2007 - I am a builder and I would be delighted to know how to build a house for less than £100K. In my view a 120m2 3-bed semi with a single integral garage is going to cost at least £140K just on construction costs alone. Then there is the cost of finance, the fees to get planning permission (planning applicaion charges, bat survey, land survey, architect fees, asbestos and environmental survey if there's any demolition involved (even a shed) and so on), and Section 106 charges, which would cost at least £12,000 per 3-bed house in my area.
Also, where are you going to get the land for just one house? The Government has just announced it is going to kill off "garden grabbing", or the more efficient use of existing residential land, which means all the new houses will have to be built on large greenfield sites or expensive-to-refurbish "waste land". Only the big construction firms have the capital to take on such projects, which means large estates with high densitities. They're not going to give away their building sites so you can build your cheap little house. They want big sites because that's the only way developers can afford to build "affordable" homes i.e. they are forced by the Government to give away one-third to 50% of their plots to a housing association, and they have to recoup these costs and try and make a profit on the remaining "non-affordable" houses. The large firms are also going to be looking for economies of scale so they can try and absorb the heavy new costs coming up of building "zero-carbon homes" from 2016, which is only going to make it even more expensive to build houses.
This new garden grabbing policy is going to virtually kill off my business, because I will have much less chance of finding a site where I can build a few houses here and there and hopefully make a profit that will allow me to take a wage and give some sort of return on my capital. Self-builders may find a few sites here and there, but unless the planning changes radically, housebuilding is going to be a world of large estates, not one-off houses for less than £100K. There's simply no land, and the new policy of "local accountability" will almost certainly mean a lockdown on small infill plots. In my bitter experience existing homeowners always object to anything anywhere near their own properties: they are obsessed with "overlooking" and anything that changes the status quo.
As for the cost of land, I agree it is ludicrous, but that's because our planning rules encourage it at every step. Everyone other than landowners hates developers and housebuilders and thinks we make vast profits. We don't. The people who make the money are landowners and the Government, with its VAT and stamp duty and S106 charges and its free affordable homes.
10. doggett said...
"Back in 2004, the Government was given the unenviable news that 120,000 new houses would be needed each year by economist Kate Barker."
That wasn't news, that was her opinion. As was (October 24 2007)
"The crisis in financial markets is unlikely to prompt a property crash or even bring the upward trend in house prices to an end, a member of the Bank of England's monetary policy committee said yesterday.
Kate Barker ... said it was "not immediately obvious" why recent developments should provide a "trigger which significantly alters expectations of continued robust house price growth"."
11. need-a-crash said...
Very strange arguments from NLA. Surely the ballooning of house prices and lack of building new houses has been to the advantage of their members so why do they see these as a problem? Then they trot out the usual one about people not being able to get mortgages while ignoring the credit binge of the last ten years and the fact that this illustrates why house prices have to fall.
12. letthemfall said...
Here in the South even "agricultural" land can fetch rather more than this. Round my way an "equestrian plot" (about 1 acre) is on sale for £30k.
And a while ago a tumble-down "desirable" pad, needing huge expenditure to make habitable, went for the price of staging an opera; but more absurdly was the bit of pasture for sale in addition - £100k. MW should be perhaps modify his neologism to Land_Owner_ist. They love it the Home Counties classes.
13. tenyearstogetmymoneyback said...
Builder @ 9.
Having made the original post (but only just come back to it) I have a question which I would love answering.
In about 1995 Crest were selling two bed houses on an estate in New Milton, Hampshire for £52000.
These weren't subsidised or anything. It was a greenfield site and they had to completely replace a mile
of country lane with a proper road as a condition for the development and put in all the roads, sewers etc
which involved. The other houses were in proportion at around the same time you could buy a new three
bed semi with garage and cloakroom for about £90000.
Anyway the question is how much has the actually construction / rebuilding cost gone up on these houses
since then ?
The high cost of land is illustrated by the fact that in Bournemouth the norm is to demolished some nice 1970s
house in order to build blocks of flats (which are usually of some thrown together timber frame design).
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