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Angry Ranting From Boss Of Redrow

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http://ftalphaville.ft.com/blog/2010/11/04/394276/house-price-rant/

Pressure can do funny things. Just ask Steve Morgan.

The chairman and biggest shareholder of housebuilder Redrow has let rip at the company’s AGM on Thursday morning, accusing the government and regulators of deliberately suppressing housing demand at the very time a chronic housing shortage is laying the foundations for the next boom and bust cycle.

If only every annual shareholder meeting could be like this.

Warning: long, but entertaining.

(emphasis ours)

In recent months there has been much scaremongering in the media about the state of the housing market. Although the market has undoubtedly been affected by the current economic climate, underlying demand remains strong as there are tens, if not hundreds of thousands of people wanting to buy their first home. Private sector rents are rising as first time buyers are being stifled by the chronic shortage and affordability of mortgages. Most people are left with little choice but to go into the private rented sector or live with their parents. Every week we are forced to turn away potential purchasers simply because they do not have a deposit of 25% or more; people with excellent jobs who under normal circumstances would easily qualify for a mortgage.

For generations 95% mortgages have been the norm. Indeed the vast majority of existing home owners started out buying their first home with a mortgage of this size. Yet the current generation of first time buyers are being denied the opportunity that their parents and grandparents took for granted, simply because they are unable to secure an affordable mortgage with a modest deposit. As a direct consequence of this worsening mortgage famine, the average age of an unassisted first time buyer is now 37 and rising rapidly.

The demand for new homes remains strong, but with only six lenders now covering over 90% of the lending market, the mortgages to meet that demand are not available. In the last three years the number of mortgage products available to buyers with deposits of 5% or less has fallen from 1,224 to just 33. The situation could get a whole lot worse if the FSA’s proposed changes in its Mortgage Market Review come to fruition.

The case for resolving the mortgage crisis is compelling as we cannot have a buoyant UK economy without a healthy housing market. Each new home creates around six jobs, both directly and indirectly. Building an extra 100,000 new homes per annum to meet the country’s desperate needs will create around 600,000 new British jobs and all the tax revenues that go with it.

The Coalition Government has stated publicly that it is committed to an increase in the construction of much needed new homes and we strongly welcome that commitment. However this will simply not happen without an adequate and fairly priced supply of mortgages. At the very time when the country is in a housing crisis, the house building industry is working at little over 50% of the output of just a few years ago.

Our message to the Government is simple: the regulators are going too far and the medicine risks killing the patient. Deliberately suppressing housing demand at the very time that the country has a chronic housing shortage is laying the foundations for the next boom/bust cycle. The way to end the cycle of boom and bust is to increase the supply of new homes to meet the demand by freeing up the supply of affordable mortgages.

Right, there’s quite a bit to pick up on.

First, Morgan’s claim that 95 per cent mortgages have been the norm for generations? Is that really the case? Is it unfair to ask for deposits of 25 per cent or more and is it really the case that we can’t have a health economy without a buoyant housing market? As for the idea that the government and regulators are deliberately suppressing demand, that seems to be the stuff of fantasy.

Still we don’t have thousands of houses to sell.

___________________________

Meanwhile, the latest Halifax house price survey is out and it shows prices rising 1.8 per cent in October after falling 3.7 per cent in September.

However, it also shows that prices in the three months to October were 1.2 per cent lower than in the preceding three months. And that’s the figure economists are focusing on.

Howard Archer of IHS Global Insight:

As was the case and as we stressed when the Halifax reported that house prices slumped by 3.7% in September, housing market data can be volatile on a month-to-month basis and from survey to survey, so it is best not to attach too much importance to one piece of data but to try and take an overall view from the available evidence. Indeed, Halifax itself highlighted the three-month trend, which showed house prices falling by 1.2% in the three months to October compared to the three months to July.

To further highlight this fact, the Halifax’s data follow on from the Nationwide reporting that house prices fell 0.7% month-on-month in October, having been flat in September.

The year-on-year rise in house prices slowed to 1.4% in October from 3.1% in September and a peak of 10.5% in April on the Nationwide measure. We would argue that the Halifax data showing house prices rising by 1.8% in October after slumping by 3.7% in September is not inconsistent with our view that house prices will trend down gradually overall through the final months of 2010 and during 2011 rather than crash, to lose around 10% of their value. Having said that, there may well be significant volatility around an overall gradually declining trend.

Here's a suggestion - cut your prices, you whining berk

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http://ftalphaville.ft.com/blog/2010/11/04/394276/house-price-rant/

Here's a suggestion - cut your prices, you whining berk

precisely. These bastards won't go down without a fight. Which is fair, but they will still need to adjust their business model. The only chance they have to survive is to sell for less.

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I think 10% deposits has been fairly common throughout the years, its what the parents got in the mid 70s anyway, but 10% ARE available now, you might have to pay one or two percent more than a 25% deposit mortgage, but given rates can only rise, thats hardly surprising.

People arent buying his homes because theyre overpriced shoeboxes. I doubt he lives in one.

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"For generations 95% mortgages have been the norm."

Only if you are a small rodent and your generation lasts no more than 3 years.

The thing is 95% of £80k is a perfectly affordable mortgage for most.

95% of £165k is not.

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So he has lots of houses to shift, and lots of people are interested but only at lower prices. And the government, by inaction of not supplying public money, are preventing said people from buying these houses, which will lead to a housing shortage.

Erm.

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Company boss wants banks to loan more money, so people can pay too much for his overpriced product, as they have done in the past. Rather than reduce his prices and profit margins to meet what people can more sensibly afford to pay. He wants horal mazard.

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Of course - what this moron is asking for is

THE RETURN OF LIAR LOANS!!!

:rolleyes::rolleyes::rolleyes:

He does not understand the first thing about being ANGRY at the state of the UK housing market.

Try being priced out of even a bedsit for over a decade, then having your money stolen, to pay for this toxic mortgage debt, or everyone else's house.

Pathetic little runt

I must be a sadist, because I want to see those responsible, The Labour Party, The regulators, The Bankers, HouseBuilders, Estate Agents suffer for twice as long as we have.

About 20 years should do it..................................[Thankfully I know my wish will come true.]

Edited by Dan1

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Here's a suggestion - cut your prices, you whining berk

+

"the house building industry is working at little over 50% of the output of just a few years ago."

I'm desperately hoping somebody at redrow will be able to weave together these two quotes. But that's me: eternal optimist.

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The case for resolving the mortgage crisis is compelling as we cannot have a buoyant UK economy without a healthy housing market.

Instead of making out so greedy like a greedy little gekko if he really wants "a buoyant UK economy" he should drop his house prices to allow UK workers to compete for the jobs the UK government are giving away to people around the world.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=153993&st=15#entry2773104

Edited by billybong

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Of course they can sell their houses.

Okay, so a house won't sell at say £300K, but it would sure as hell sell for £1. The trick is to find an in-between price that it will sell at..... market forces ;).

Trouble is - I'm not supporting this guy, but I suspect if they were marketing their house at cost or even below, most posters on here would think that was too much, and a high proportion of buyers would still not be able to get their mortgage.

If the house cost 100K to build, services and local taxes to Council 20K, then probably the land was 50K per house. So if land cost was 10K, then yes their price with no profit at all to builder would be 130K rather than 170K. But the land they built on is/was priced according to selling prices of houses at the time they bought it. When prices finally drop, then presumably the price of land will too, and that will eventually feed into the sale prices. Till then I suspect the only way they can make their houses 'affordable' is to sell at a loss. Good for buyers, but not ultimately for the building sector or for the wider economy.

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Trouble is - I'm not supporting this guy, but I suspect if they were marketing their house at cost or even below, most posters on here would think that was too much, and a high proportion of buyers would still not be able to get their mortgage.

If the house cost 100K to build, services and local taxes to Council 20K, then probably the land was 50K per house. So if land cost was 10K, then yes their price with no profit at all to builder would be 130K rather than 170K. But the land they built on is/was priced according to selling prices of houses at the time they bought it. When prices finally drop, then presumably the price of land will too, and that will eventually feed into the sale prices. Till then I suspect the only way they can make their houses 'affordable' is to sell at a loss. Good for buyers, but not ultimately for the building sector or for the wider economy.

I thought these people all had massive land banks and hence the cost of the land was pretty much irrelevant. They should be able to sell at a loss - after all, building is notoriously cyclical and they would have built up large cash holdings during the good times....right? ;)

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Trouble is - I'm not supporting this guy, but I suspect if they were marketing their house at cost or even below, most posters on here would think that was too much, and a high proportion of buyers would still not be able to get their mortgage.

If the house cost 100K to build, services and local taxes to Council 20K, then probably the land was 50K per house. So if land cost was 10K, then yes their price with no profit at all to builder would be 130K rather than 170K. But the land they built on is/was priced according to selling prices of houses at the time they bought it. When prices finally drop, then presumably the price of land will too, and that will eventually feed into the sale prices. Till then I suspect the only way they can make their houses 'affordable' is to sell at a loss. Good for buyers, but not ultimately for the building sector or for the wider economy.

While i see where you are going you would need to ask why is the land and the houses more?

Answer, because companies like his helped ramp it up, nobody felt sorry for them when they bought the land for 10k and sold it for 200k so why feel sorry for them now.

They are getting exactly what the greed they displayed deserves.

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How long does his 100,000 houses take to build if they create 600,000 jobs. Or are these jobs just fleeting, a month here, a month there..?

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How long does his 100,000 houses take to build if they create 600,000 jobs. Or are these jobs just fleeting, a month here, a month there..?

Fleeting. A measure of how fleeting work is in the building sector is the speed at which they laid off building workers immediately the downturn came.

No sentiment for employment of workers then.

In the 90s recession after that very profitable boom they immediately laid off about 1 million building workers - no sentiment in those days either. His bleating about each house creating 6 jobs is self serving hypocrisy.

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I thought these people all had massive land banks and hence the cost of the land was pretty much irrelevant. They should be able to sell at a loss - after all, building is notoriously cyclical and they would have built up large cash holdings during the good times....right? ;)

1) they may have massive land banks, but much of it will have been bought at 2005 type prices which is far from irrelevent.

2) Much though you might think that they should had stored up profit from the "good" years, unfortunately the requirements of stock market investors makes that next to impossible

tim

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I think 10% deposits has been fairly common throughout the years, its what the parents got in the mid 70s anyway, but 10%

In isolation 10% isn't such a bad deposit, so long as they make siginificant checks elsewhere regarding your income.

Giving out interest only loans to people lying on their application form is a recipe for disaster.

I don't remember Redrow turning away business when people bought their houses when they shouldn't have been able to. Now it's time to pay the piper.

Edited by exiges

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1) they may have massive land banks, but much of it will have been bought at 2005 type prices which is far from irrelevent.

2) Much though you might think that they should had stored up profit from the "good" years, unfortunately the requirements of stock market investors makes that next to impossible

tim

So it could be argued that this business is inherently one that should not be floated on the stock exchange and left in private hands?

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  • 150 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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