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The Preacherman

Redrow Budgeting For Price Falls

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Conversation last night with an acquaintance who senior in finance at Redrow the house builder. He said that they are now budgeting for falls in house prices of 6% over the next year when performing investment calculations.

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Conversation last night with an acquaintance who senior in finance at Redrow the house builder. He said that they are now budgeting for falls in house prices of 6% over the next year when performing investment calculations.

Did he give you a clue as to what they are budgeting for in 2011?

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unfortunately i don't think this anecdotal reveals as much as I first hoped. I'd be shocked if any company in their position wasn't budgeting for modest drops, with the expectation that prices remain level. It still provides us hope that the tide is slowly turning, but most companies I deal with are intentionally and openly being pessimistic with their forward projections, with the hope that they easily outperform their targets.

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unfortunately i don't think this anecdotal reveals as much as I first hoped. I'd be shocked if any company in their position wasn't budgeting for modest drops, with the expectation that prices remain level. It still provides us hope that the tide is slowly turning, but most companies I deal with are intentionally and openly being pessimistic with their forward projections, with the hope that they easily outperform their targets.

This is hugely significant because of the competitive pressures in buying land the big house builders are reliant on two things to make a profit. The first is screwing contractors & suppliers in to the ground, hence the poor standards of many new builds.

However, the other thing they need is HPI. With falling or even stable prices it is nigh on impossible for a builder to turn on profit on recently bought land.

Therefore, the shutters are going back up with no new sites to be started and no new land to be bought.

Edited by legend

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It makes sense to budget for the possibility of price falls even if you're expecting price rises. That way you don't end up like someone who bought a BTL flat in Leeds, off-plan, on a 100% mortgage, in June 2007!

Edited by blankster

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I wish I had access to a major car company's forcecast figures. Where I live they seem to know exactly when the economy is about to nose-dive - they lay off people just before this. They also seem to know when the economy starts to grow again, and set on staff at that point.

There again, Wilie Walsh seems certain that air travel numbers are going to keep on growing. He must know something we don't.

BA moving base

“Growth is not going to go away. Growth will just leave the UK and go to other parts of Europe.

“BA will be able to access that growth because our assets are mobile and we can focus on developing Madrid rather than . . . London.”

Of course it could just be a ploy to persuade the government to allow the 3rd runway at Heathrow, but what do I know?

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Conversation last night with an acquaintance who senior in finance at Redrow the house builder. He said that they are now budgeting for falls in house prices of 6% over the next year when performing investment calculations.

This has been a ploy I have noticed. The VI's talk about modest price falls before things pick up again in 2012 with huge price rises and things back to normal. These figures of 5% and 6% are just designed to make your average punter think "Aint that bad this crash thingy, 5% just puts it back to where it was 6 months ago"

My impression is that this is a collective ploy. They know that the fear is in the air about a double dip and a proper crash. By saying 6% fall it makes it sound like some real calculation has taken place and this is precisely what is going to happen. If they had stated an increase people might just see it as spin. 6% is also small enough to only put off the most cautious of buyers

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I think some of the building co's have trading updates this week. The planning rules as reported by the press seem to be moving more restrictive, support schemes being pulled. It sounds like increased costs and on flat volumes changing the mix seems like the main strategy. The mortgage market does appear to be about to seize up again

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I think some of the building co's have trading updates this week. The planning rules as reported by the press seem to be moving more restrictive, support schemes being pulled. It sounds like increased costs and on flat volumes changing the mix seems like the main strategy. The mortgage market does appear to be about to seize up again

There has been in a change in strategy with the types of houses they are building as the planning commitments to density and social housing are going so the builders will go back to building 4+ bed executive boxes.

also the builders are being clobbered by the stricter environmental rules that will dramatically increase costs. The zero carbon target for new homes in 2016 will add £40K extra cost to a typical home.

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  • 146 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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