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Reuters: New Arguments Against Help To Buy

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http://uk.reuters.com/article/2013/08/16/uk-britain-housing-idUKBRE97F0FI20130816?utm_source=buffer&utm_campaign=Buffer&utm_content=bufferab272&utm_medium=twitter

Bricks and finance shortages frustrate British housing hopes

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By Brenda Goh

LONDON, Fri Aug 16, 2013

(Reuters) - When the British housing market finally showed signs of life earlier this year, Stephen Stone's company tried to order concrete building blocks for a new homes project, only to find he would have to wait months and import them from Germany.

The experience of Stone, chief executive of housebuilder Crest Nicholson, typifies the industry's difficulties in responding rapidly to government pressure for more new homes to ease a shortage and help a weak economy.

"Imagine if you haven't got raw materials like bricks and blocks and you're waiting for three months to get them. It's a problem," Stone said.

Bricks and blocks aren't the only problem for a sector that shrank sharply to survive the property downturn after the 2008 financial crisis. It now faces rising costs, and financing conditions remain tough, on top of long-standing difficulties in getting projects approved under Britain's strict planning rules.

With housebuilding at its lowest in about 90 years, Chancellor George Osborne has launched the first part of a scheme to lend and guarantee billions of pounds in mortgages, aiming to help Britons buy newly built homes with relatively small deposits.

But the chances of his "Help to Buy" scheme drawing a rapid response are slim, due largely to the shrunken state of an industry that had relied heavily on foreign workers, many of whom left Britain during the downturn because of a lack of jobs.

Britain is therefore unlikely to achieve anything near the 250,000 homes needed each year to keep up with a growing population, and critics fear this shortfall means Osborne's scheme will fuel house prices rather than house building.

"The government hopes that we can turn the tap on right away but it doesn't happen that way," Stone told Reuters. "It'll take at least four to six months for the supply chain to respond. The construction industry is 50 percent of what it was. The overseas workers have all gone home."

The government declined to comment on its expectations for the industry.

Housebuilding in Britain has fallen to levels not seen since the 1920s, according to property consultancy Savills, after the largest housebuilders, such as Persimmon and Taylor Wimpey, retrenched during the downturn to concentrate on raising profit margins rather than their sales.

Private housebuilders completed 88,000 homes last year, well below an annual average of 115,000 over the past four years, Savills said.

The country's 10 biggest housebuilders, such as Barratt Developments, which construct about two thirds of new homes, have not committed themselves to firm completion targets. However, some say they are aiming to sell 20-30 percent more homes annually in the next few years.

Osborne and his department, the Treasury, have also not said how many more homes they want built under the scheme. Its second phase, in which the government will guarantee loans for people buying second-hand homes, will start in January.

"There are a lot of other obstacles that the government is not only not overcoming but in some respects is making worse," said Roger Humber, strategic policy adviser to lobby group House Builders Association.

LONG WAITING TIMES

Stone's lengthy wait shows how building materials makers, such as Wienerberger, Michelmersh and HeidelbergCement's UK arm Hanson, also retrenched in Britain and continental Europe. Such suppliers have shut 19 plants in the last five years as brick production halved due to the waning demand.

About 358,000 workers have left the British construction industry, a 15 percent drop since 2008, government data showed. Many building materials makers are now adding shifts and hiring workers, but say a sharp rise in production will take months.

"Our customers are going to have to be patient," said David Weeks, spokesman for Hanson, which plans to reopen a mothballed factory in Cloughton, northern England, by the end of the year.

"We've been through some severe pain in the last five years; our workforce has reduced by half to about 4,000 today, and we've lost probably 45 percent of our production volumes."

On top of this, builders say it can take up to two years to start work on sites due to delays in gaining planning permission. The government has tried to speed this up by giving local authorities more decision-making powers.

"There has been a slight improvement. The accent is on that 'slight'," said Taylor Wimpey's CEO Pete Redfern.

Overall planning permissions are running at about 140,000 houses a year, slightly above the 100-110,000 mark it was at previously, but nowhere near the 200-250,000 homes that the industry should probably be building, he said.

PRESSURE ON SMALL PLAYERS

Small and medium-sized housebuilders, which account for about a third of new houses, also have problems in persuading banks to finance their projects. Net bank lending to construction firms has fallen by between 4 and more than 10 percent every quarter for four years, Bank of England data show.

A Federation of Master Builders survey found 90 percent of 1,000 building firms questioned in late 2012 said raising finance was as difficult as two years ago, or even harder.

"The number of small housebuilders who are actually active at the moment is definitely falling. Some will never start again. Others want to - they want to get land and so on - but they just can't get the credit from the banks," said Humber.

Building costs are also expected to be pushed up by new regulations, with local councils to charge housebuilders fees to help finance items such as roads and a government push for a net-zero carbon emissions standard for all new homes by 2016.

With such challenges, some have questioned whether the industry has the capacity or even willingness to aim for the 250,000 home target outlined in a 2004 government-backed review of the housing market.

Britain experienced housebuilding of over 200,000 a year in the 1950s to late 1970s, bolstered by government efforts to create public housing, data from Knight Frank showed. Private housing completions reached a high of 203,320 in 1968.

"250,000 is a figment of everyone's imagination," said Martin Warner, chief executive of brickmaker Michelmersh. "We're miles off that."

(Reporting by Brenda Goh, Editing by Kate Holton and David Stamp)

Edited by Tired of Waiting

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Time to invest in your own brick building company?

Lacking brickies too:

But the chances of his "Help to Buy" scheme drawing a rapid response are slim, due largely to the shrunken state of an industry that had relied heavily on foreign workers, many of whom left Britain during the downturn because of a lack of jobs.

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It puts into perspective all those adverts not so long ago for UK youngsters to train as brickies and so on. Claiming to offer a long term future. No doubt the training centres did well out of it at the time.

It's pretty feeble stuff blaming the UK's inability to build more houses on supply problems with concrete blocks etc.

As for businesses/small businesses lack of funding from banks. That's been reported to be an issue for decades now but they never seem to sort it out - complaints yes but sorting out no.

It's no way to run a country.

Edited by billybong

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http://

en.wikipedia.org/wiki/The_London_Brick_Company

A short history of the London Brick Company.

Apparently it diversified into the London Brick LandFill Company as one of its brick making sites was backfilled to build housing.

UK planning - an endless stock of Daily Mash stories.

Edited by billybong

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It puts into perspective all those adverts not so long ago for UK youngsters to train as brickies and so on. Claiming to offer a long term future. No doubt the training centres did well out of it at the time.

It's pretty feeble stuff blaming the UK's inability to build more houses on supply problems with concrete blocks etc.

As for businesses/small businesses lack of funding from banks. That's been reported to be an issue for decades now but they never seem to sort it out - complaints yes but sorting out no.

It's no way to run a country.

I agree, it is pathetic, the whole mess. Shameful. Ridiculous. Disgusting. Revolting.

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The experience of Stone, chief executive of housebuilder Crest Nicholson, typifies the industry's difficulties in responding rapidly to government pressure for more new homes to ease a shortage and help a weak economy.

.........

.........

"The government hopes that we can turn the tap on right away but it doesn't happen that way," Stone told Reuters. "It'll take at least four to six months for the supply chain to respond. The construction industry is 50 percent of what it was. The overseas workers have all gone home."

So if that's true shouldn't there be hundreds of thousands less demand for housing :rolleyes:

(seeing as how the construction industry apparently employs about 2 to 3 million people and 50% must be something like 1 to 1.5 million people)

It sounds like a having your cake and eating it sort of argument. People are starting to get familiar with that sort of approach these days along with privatizing gains and socializing losses etc.

Edited by billybong

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So if that's true shouldn't there be hundreds of thousands less demand for housing :rolleyes:

(seeing as how the construction industry apparently employs about 2 to 3 million people and 50% must be something like 1 to 1.5 million people)

It sounds like a having your cake and eating it sort of argument. People are starting to get familiar with that sort of approach these days along with privatizing gains and socializing losses etc.

Some numbers below, but incomplete.

But the chances of his "Help to Buy" scheme drawing a rapid response are slim, due largely to the shrunken state of an industry that had relied heavily on foreign workers, many of whom left Britain during the downturn because of a lack of jobs.

Britain is therefore unlikely to achieve anything near the 250,000 homes needed each year to keep up with a growing population, and critics fear this shortfall means Osborne's scheme will fuel house prices rather than house building.

"The government hopes that we can turn the tap on right away but it doesn't happen that way," Stone told Reuters. "It'll take at least four to six months for the supply chain to respond. The construction industry is 50 percent of what it was. The overseas workers have all gone home."

(...)

About 358,000 workers have left the British construction industry, a 15 percent drop since 2008, government data showed. Many building materials makers are now adding shifts and hiring workers, but say a sharp rise in production will take months.

Edited by Tired of Waiting

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It looks like a article exaggerating problems in an attempt to get even more government (taxpayer) funding - in the grandiose bailout style as refined by the banking system.

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If they [government] really wanted houses building then they would let individuals build homes. Currently the planning process is so restrictive it is almost impossible to buy a plot.

Over here they have areas specifically for self builders, they are zoned LOW DENSITY residential areas and are specifically for people who wish to build their own home on a large plot. Typically these areas are 15 mins walk or 5 mins drive into the village/town.

Like I say if the government really wanted house building then they would free up the planning system so that you and I could buy 1/2 acres for £40k then build a modest efficient home to our liking, you know like 'they allowed' the previous [unnamed] generation to do in the 70's and 80's.

They will not allow low density zones areas now, so you can conclude that they do not want houses built.

Just to add for the NIMBY'S, that eventually these low density areas would become high density like other urban areas in the UK. To achieve the building goal you would have to force councils by law to allocate X amount of space around each town.

The amount of X would need to be far in excess of what is required, this would discourage hoarding of land with planning as it would not be a rare commodity like it is now.

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If they [government] really wanted houses building then they would let individuals build homes. Currently the planning process is so restrictive it is almost impossible to buy a plot.

Over here they have areas specifically for self builders, they are zoned LOW DENSITY residential areas and are specifically for people who wish to build their own home on a large plot. Typically these areas are 15 mins walk or 5 mins drive into the village/town.

Like I say if the government really wanted house building then they would free up the planning system so that you and I could buy 1/2 acres for £40k then build a modest efficient home to our liking, you know like 'they allowed' the previous [unnamed] generation to do in the 70's and 80's.

They will not allow low density zones areas now, so you can conclude that they do not want houses built.

Just to add for the NIMBY'S, that eventually these low density areas would become high density like other urban areas in the UK. To achieve the building goal you would have to force councils by law to allocate X amount of space around each town.

The amount of X would need to be far in excess of what is required, this would discourage hoarding of land with planning as it would not be a rare commodity like it is now.

+1

and we would get individual, diverse, quality built, sustainable homes that would enhance the environment in contrast to the Taylor-Wimpey 'idyll' estates of 'diverse units'; units that I cannot understand why anybody in their right mind can consider are nice to own let alone commit £250-450k and the next 30 years of your life towards

The are only two possible reasons i) self build is too difficult a concept for simple minds to grasp or enact on a large scale or, ii) the large house builders have a hold over those who make decisions.

if it is the choice between a Taylor Wimpey estate or no building, I am afraid that I side with the Nimbys. I wouldn't hestitate to allow a self build.

Edited by LiveinHope

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There are a lot of nice individual homes here in Ireland, they are a bit to spread out for various poor planning policy, but that need not be case - lessons can be learnt.

I Just did a search for building plots in the UK within 1 reasonable 10 mile radius of an area that I have interest in and found 1 building plot for sale 0.15 acre for £250k.

If the government really wanted houses building then you would find 20+ plots prices <£50k. The only ting holding this back is planning policy which lies squarely at the feet of the government.

The government do not like self builders because they do not get a cut or backhander from private builders.

Incidentally I just searched for building plots here in Co.Galway and there are >600 available which I suspect is more than the total available in the entire of the UK. Most are priced moderatley at around €40k for 1/2 acre.

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My family were Master brickmakers late 19th century in the Barnsley area. I might need to brush up on the family skill set.

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I would move back and build a house tomorrow if they allowed me.

The reason they will not allow building of sensibly planned individual houses is that it would devalue the surrounding houses. People do not trust money any more, so they save in property. Allowing a newcomer into the village to build a house is like printing money is to us.

If you went door to door and paid off the new neighbors then you would find no objection, the only problem is then government planning LAW which planning officers must uphold.

Local infrastructure charges also take the piss!!! What the Feck are you paying council tax for? 25 years of council tax are not enough to pay for the local roads, etc... Of course it is, but the local council want larger pensions at your expense.

Councils should be begging for more houses to be built so they collect more tax.

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New arguments against? They're all against! Even Osborne's hopes for re-election on the back of it have more to do with magic thinking than cold, hard facts.

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New arguments against? They're all against! Even Osborne's hopes for re-election on the back of it have more to do with magic thinking than cold, hard facts.

:lol:

Sure, I know, the previous arguments were also against HTB, I didn't mean otherwise, just that this "lack of bricks" thing is a new one, at least for me, and a curious one. And the lack of skilled labour.

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There are a lot of nice individual homes here in Ireland, they are a bit to spread out for various poor planning policy, but that need not be case - lessons can be learnt.

I Just did a search for building plots in the UK within 1 reasonable 10 mile radius of an area that I have interest in and found 1 building plot for sale 0.15 acre for £250k.

If the government really wanted houses building then you would find 20+ plots prices <£50k. The only ting holding this back is planning policy which lies squarely at the feet of the government.

The government do not like self builders because they do not get a cut or backhander from private builders.

Incidentally I just searched for building plots here in Co.Galway and there are >600 available which I suspect is more than the total available in the entire of the UK. Most are priced moderatley at around €40k for 1/2 acre.

Great posts GtI, all of the above: + 1 !

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New arguments against? They're all against!

Since 2008 western governments have realised that they can safely ignore any policy criticism because aside from a bit of noise on the internet people will just suck it up.

Edited by goldbug9999

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There are a lot of nice individual homes here in Ireland, they are a bit to spread out for various poor planning policy, but that need not be case - lessons can be learnt.

I Just did a search for building plots in the UK within 1 reasonable 10 mile radius of an area that I have interest in and found 1 building plot for sale 0.15 acre for £250k.

If the government really wanted houses building then you would find 20+ plots prices <£50k. The only ting holding this back is planning policy which lies squarely at the feet of the government.

The government do not like self builders because they do not get a cut or backhander from private builders.

Incidentally I just searched for building plots here in Co.Galway and there are >600 available which I suspect is more than the total available in the entire of the UK. Most are priced moderatley at around €40k for 1/2 acre.

Why should plots cost £50k??? Farmland which is what you would be building on is £7k per acre. Thus maybe a plot should be about £2k with the costs of planning permission (under a sane system) taken into account?

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Why should plots cost £50k??? Farmland which is what you would be building on is £7k per acre. Thus maybe a plot should be about £2k with the costs of planning permission (under a sane system) taken into account?

I think GTI was talking about a serviced plot, with utilities, by a road, etc., and on a decent residential location?

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I think it's cute that Reuters actually believe that Help to Buy is motivated by a genuine desire to see more houses built- it makes me reconsider my view that hacks are all hard bitten cynical types, clearly these reporters are not like that- they are more the unicorn and rainbows type.

Meanwhile in reality Help to Buy is already achieving it's real purpose- which is to goose the housing market to grease the path of the conservative party on their way to winning the next election.

The only thing that might derail the beast would be if the young targets of this scheme work out that they are being incited to take on massive debt to ensure a Tory victory- by people who know full well that interest rates will soon rise and eat them alive.

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Incidentally I just searched for building plots here in Co.Galway and there are >600 available which I suspect is more than the total available in the entire of the UK. Most are priced moderatley at around €40k for 1/2 acre.

Amazing. A 1/2 acre of building land would cost between ten and thirty times that here.

What would a plot have costed in Galway during the boom?

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Amazing. A 1/2 acre of building land would cost between ten and thirty times that here.

What would a plot have costed in Galway during the boom?

+ 1

And it's not only in Western Ireland. Plots don't cost much more than that across Europe too, including France and Germany - unless you are very near a big city, of course, and by that I mean a short commute away, say less than 30min.

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The experience of Stone, chief executive of housebuilder Crest Nicholson, typifies the industry's difficulties in responding rapidly to government pressure for more new homes to ease a shortage and help a weak economy.

"Imagine if you haven't got raw materials like bricks and blocks and you're waiting for three months to get them. It's a problem," Stone said.

I knew it.....Rammed Earth tyres for building come of age ? :)

http://www.earthship.com

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Is anyone else seeing new asking prices jump? We will have to watch the Rightmove index over the next few months. Next stop full market subsidy? That 160k 2 bed ex council house in a bad area is even further out reach.

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