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Pidgley Takes Berkeley Into Rented Housing

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Pidgley takes Berkeley into rented housing

Veteran house builder Tony Pidgley is diversifying into building and owning affordable rented homes.

The chairman of Berkeley Group said the house builder was setting up a rented housing fund to build 380 homes next year.

This is Berkeley Group’s second foray into a homes for rent deal and comes after Chancellor George Osborne unveiled plans to offer grants for rental homes pegged at 80% of the market rate.

Pidgley said the move would help finish sites as buyer demand slowed and take advantage of the new Government funding initiative.

Berkeley’s first rental scheme was built under the Housing and Communities Agency’s private rental initiative, which sees the agency retain a 20% stake in the homes.

This latest deal is being set up with a council and will see Berkeley own and manage the homes.

Pidgley predicted that more developers would follow as long as mortgages remained hard to secure and rents remained high because of housing shortages.

He said: “The industry has got to change its approach. The days of a house builder buying it, building it, selling it and walking away are, I think, gone.

“If the sites don’t get developed there will be no homes. So what we’re saying to local authorities is that we’ll lock them in and we’ll rent them at a discount. It’s just a private sector company doing what the RSLs do.”

/source: http://www.constructionenquirer.com/2010/1...rented-housing/

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Pidgley takes Berkeley into rented housing

Veteran house builder Tony Pidgley is diversifying into building and owning affordable rented homes.

The chairman of Berkeley Group said the house builder was setting up a rented housing fund to build 380 homes next year.

This is Berkeley Group's second foray into a homes for rent deal and comes after Chancellor George Osborne unveiled plans to offer grants for rental homes pegged at 80% of the market rate.

Pidgley said the move would help finish sites as buyer demand slowed and take advantage of the new Government funding initiative.

Berkeley's first rental scheme was built under the Housing and Communities Agency's private rental initiative, which sees the agency retain a 20% stake in the homes.

This latest deal is being set up with a council and will see Berkeley own and manage the homes.

Pidgley predicted that more developers would follow as long as mortgages remained hard to secure and rents remained high because of housing shortages.

He said: "The industry has got to change its approach. The days of a house builder buying it, building it, selling it and walking away are, I think, gone.

"If the sites don't get developed there will be no homes. So what we're saying to local authorities is that we'll lock them in and we'll rent them at a discount. It's just a private sector company doing what the RSLs do."

/source: http://www.construct...rented-housing/

"we'll rent to the council at a discount."

Its BMV for rentals...except they are enticing the big money from the taxpayer.

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Pidgley takes Berkeley into rented housing

Veteran house builder Tony Pidgley is diversifying into building and owning affordable rented homes.

The chairman of Berkeley Group said the house builder was setting up a rented housing fund to build 380 homes next year.

Like 380 flats is going to make a difference

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edited for accuracy..

He said: “The industry has got to change its approach. The days of a house builder buying it, building it, not paying anybody,selling it and walking away are, I think, gone.

old Pikeys never etc, etc..

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I noticed this in the local paper this week.

A £3 MILLION block of flats which has stood empty for more than five years is being brought to back to use by housing council tenants.

The properties, consisting of 14 two-bedroom flats and two one- bedroom flats, have been unoccupied ever since they were given planning approval in 2000.

Once they were built, they failed to meet the council's building control standards because of an undersized archway and remained uninhabitable.

The owner was unable to complete the works, which also included installing heating systems and plumbing, because he was caught out by the credit crunch.

But now the council's empty property team has agreed to loan him the money to complete the work which will allow the flats to be let out to council tenants.

The owner of the flats will receive a short-term loan of around £60,000 to complete the final refurbishment.

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Pidgley takes Berkeley into rented housing

Veteran house builder Tony Pidgley is diversifying into building and owning affordable rented homes.

The chairman of Berkeley Group said the house builder was setting up a rented housing fund to build 380 homes next year.

This is Berkeley Group’s second foray into a homes for rent deal and comes after Chancellor George Osborne unveiled plans to offer grants for rental homes pegged at 80% of the market rate.

Pidgley said the move would help finish sites as buyer demand slowed and take advantage of the new Government funding initiative.

Berkeley’s first rental scheme was built under the Housing and Communities Agency’s private rental initiative, which sees the agency retain a 20% stake in the homes.

This latest deal is being set up with a council and will see Berkeley own and manage the homes.

Pidgley predicted that more developers would follow as long as mortgages remained hard to secure and rents remained high because of housing shortages.

He said: “The industry has got to change its approach. The days of a house builder buying it, building it, selling it and walking away are, I think, gone.

“If the sites don’t get developed there will be no homes. So what we’re saying to local authorities is that we’ll lock them in and we’ll rent them at a discount. It’s just a private sector company doing what the RSLs do.”

/source: http://www.constructionenquirer.com/2010/1...rented-housing/

One thing you can be absolutely sure of is that somehwere somehow they will be making huge profits from this ( otherwise they wouldn't be doing it)..... if they use borrowed money to build then as a minimum the houses will need to return 6% , but in fact they are likely to have to return something more like 15% once you consider cost of maintenance, insurance etc.... to me that means the sites are only likely to be in the southeast where rentals are higher. Also the council will need to relax certain planning regulations and provisions ( eg tcontributions ot infrastructure and schools etc). Pidgely won't see his return on capital employed reduce so will get the return from the taxpayer.

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One thing you can be absolutely sure of is that somehwere somehow they will be making huge profits from this ( otherwise they wouldn't be doing it)..... if they use borrowed money to build then as a minimum the houses will need to return 6% , but in fact they are likely to have to return something more like 15% once you consider cost of maintenance, insurance etc.... to me that means the sites are only likely to be in the southeast where rentals are higher. Also the council will need to relax certain planning regulations and provisions ( eg tcontributions ot infrastructure and schools etc). Pidgely won't see his return on capital employed reduce so will get the return from the taxpayer.

I think you are ignoring the margins made by housebuilders in normal times. These are iirc around 30%. This means the price the builder has paid for these units, both land and construction, are significantly below market retail value. A 5% yield on a retail price amounts to a 7% yield on a builders price. And because they are a large concern they can manage the units at a much lower cost.

Besides, no matter which way you view it, it's all new supply, and there should not be a single HPCer who does not welcome that.

Add that to the undoubted truth that others will follow, and this is quite a story.

Edited by Sledgehead

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I think you are ignoring the margins made by housebuilders in normal times. These are iirc around 30%. This means the price the builder has paid for these units, both land and construction, are significantly below market retail value. A 5% yield on a retail price amounts to a 7% yield on a builders price. And because they are a large concern they can manage the units at a much lower cost.

Besides, no matter which way you view it, it's all new supply, and there should not be a single HPCer who does not welcome that.

Add that to the undoubted truth that others will follow, and this is quite a story.

Errr, no I'm ignoring margins made by builders in normal times.... what you have to think about is what their cost of funds are and what their targetted internal rate of return is and then consider what the cost of upkeep etc is....... you state somewhat simplistically that housebuilding of this nature should be appluaded... not striktly true... I for one wouldn't a builder like this stiffing my local council into an unflexible contract that guarantees future revenues for them.... what happens when the market drops... answer ... you can bet the council will continue to paying or rather overpaying the builder... secondly I wonder why you think its OK for someone to applaud building these homes and renting them out an yet at the same time are more than happy perhaps to stick the boot into the Wilsons.... both are after all looking to make money through renting houses out, they are both investors of the same ilk with the same motivations... the only difference being that the Wilsons got a builder to build their homes for them....... while I have never been against buy to let per se, it seems a bit rich to suggest we should all applaud build to let where the taxpayer is at huge risk through a contract vs buy to let where the risk is spread round many operators and the monthly rental payments can be self-adjusting to market... I know which model I would prefer to buy in services from if I was looking to save money for my local council.

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One thing you can be absolutely sure of is that somehwere somehow they will be making huge profits from this ( otherwise they wouldn't be doing it)..... if they use borrowed money to build then as a minimum the houses will need to return 6% , but in fact they are likely to have to return something more like 15% once you consider cost of maintenance, insurance etc.... to me that means the sites are only likely to be in the southeast where rentals are higher. Also the council will need to relax certain planning regulations and provisions ( eg tcontributions ot infrastructure and schools etc). Pidgely won't see his return on capital employed reduce so will get the return from the taxpayer.

As Berkeley will "own and manage the houses" how will charging themselves for the maintenance make them any money?

tim

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A £3 MILLION block of flats which has stood empty for more than five years is being brought to back to use by housing council tenants.

The properties, consisting of 14 two-bedroom flats and two one- bedroom flats, have been unoccupied ever since they were given planning approval in 2000.

Once they were built, they failed to meet the council's building control standards because of an undersized archway and remained uninhabitable.

The owner was unable to complete the works, which also included installing heating systems and plumbing, because he was caught out by the credit crunch.

But now the council's empty property team has agreed to loan him the money to complete the work which will allow the flats to be let out to council tenants.

The owner of the flats will receive a short-term loan of around £60,000 to complete the final refurbishment.

Two months back I went to see some auction apartments that were "cash only" sales (guided at 45K).

I was informally told by one of the current owners that this was because the builder had failed to get a completion certificate for the block (I think because none of the bedrooms had opening windows to escape through).

However, this didn't stop him selling half the block at peak prices of 120K each.

(At the auction - the properties failed to sell!)

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As Berkeley will "own and manage the houses" how will charging themselves for the maintenance make them any money?

tim

No one does something for nothing and I expect we'll find that if Berkely do this that everything will be judged on the return it delivers.... either the rent will be so huge that they can afford to deliver maintenance as part of the deal, or the two are charged sperarately.... in other words the council takes a fully repairing lease with Berkely as their nominated maintenance supplier.... Berkely would then make a margin on that maintentance. The fact that Berkeley will have a long term contract instantly puts them in the driving seat..... equally those who appluad this move thinking that more houses equals greater supply equals lower prices generally you need to consider that Berkely will probably build to order... so think a modern day equivalent of social housing from the past...... when /if this ever finds it's way into the owner occupied market you'll find it's at the low end of desirability and so all this building work on a % basis would have made a desirable family home an even rarer beast and we'll be left with yet more swathes of undesirable homes we don't want...... quite aside from the fact that building "all for rent" sites is likely to fundementally alter the character of the areas they are landed on especially where the council contracts to take the lot.

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The only bad thing about this deal is the fact that the Government has to get involved.

I have no problem with housebuilders continuing to build houses, it gives me more choice as a consumer, even if as suggested it's poor quality and not available for owner occupiers, every person that rents there is not occupying somewhere else.

I have no problem with large organisations becoming landlords, it works well in other countries and it would be nice if some professionalism, or at least standardised processes, were introduced to private rentals in the UK. There are certainly some economies of scale to be had on having a full-time tradesmen on your books versus contracting each job and the admin burden that creates.

I would expect more and more building firms to use this as their business model, particularly firms that need to maintain a certain level of turnover to support their infrastructure costs, they can't just mothball everything and wait it out for a couple of years. It must be on their agendas because a lot will have ended up as reluctant landlords anyway after failing to secure buyers for recently completed developments.

This is just one example I've spotted recently

http://www.pineappleletting.co.uk/

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Pidgley takes Berkeley into rented housing

Veteran house builder Tony Pidgley is diversifying into building and owning affordable rented homes.

Unless they have large buildings with 10+ flats at hand and a healthy cashflow, this business model just isn't going to scale in the UK due to the small houses that are expensive to maintain and administer. And even in Germany where it does scale like that and the laws heavily favor the landlords, the landlording business is a difficult one and most companies lose money over time.

Also note:

This is Berkeley Group’s second foray into a homes for rent deal and comes after Chancellor George Osborne unveiled plans to offer grants for rental homes pegged at 80% of the market rate.

That's where the business is -- the free money the government is offering here.

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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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