Berkeley Group Halts Half-Built 20 Million-Pound London Housing Scheme

[sideysid]

Looks like reality is starting to bite...

http://uk.mobile.reuters.com/article/idUKKCN1181N4

[spunko2010]

Thanks. One to keep an eye on.

[chronyx]

Agreed

[Bruce Banner]

Now that is interesting.

Tony Pidgley would not be doing that without good reason and where Pidgely goes others follow.

[ARIMA]

First reaction that is weird, why not just finish it off. Or is this just highlighting why Berkeley is so successful, as it is pretty prudent and well run (for a home builder...).

[Bruce Banner]

First reaction that is weird, why not just finish it off. Or is this just highlighting why Berkeley is so successful, as it is pretty prudent and well run (for a home builder...).

Cheaper to finish it off in a recession and hold for recovery? Or try to offload, unfinished, at the best price available now to a foreign investor who doesn't know Pidgley's reputation?

[Patient London FTB]

Just to toss some guesses out there ...

1) Berkeley is pretty disciplined. Maybe on this one they've stopped because they haven't got the number of reservations they wanted for this stage in the build and they've reasoned it's cheaper to throw in the towel.

2) Something to do with the price of labour/suppliers? Construction costs have surged in London recently so perhaps this is a show of strength?

Edited September 2, 2016 by Patient London FTB

[CunningPlan]

Pidgley is back seat now. Perrins will have made the decision. And it will be on cold, hard numbers, not gut instinct.

[porca misèria]

Simple message to politicians and the BoE: bung some more money into housing so our buyers can pay.

[Bland Unsight]

Simple message to politicians and the BoE: bung some more money into housing so our buyers can pay.

You're suggesting that the cap on London Help to Buy be raised from £650k to the £2m+ or so needed to have any relevance to this particular development? (h/t Freetrader on the ballpark unit price)

[Bland Unsight]

Just thinking about the sales volumes by price (example) that used to appear in the old Land Registry HPI reports. Even a handful of houses is not entirely trivial for a market like London property over £2m - even less so if you're looking at Barnes and not Prime Central London (PCL) as there are still only about 100-200 transaction a month in the £2m+ in the Land Registry data for the whole of London. This little story may have some value as a canary in the coalmine on really toppy prices in London outside the glitzy world of PCL.

[thewig]

Fill the completed half up chockablock with minted aspirational young professionals at above market rents (no pets, no DSS, no pictures) bang the rents up 15% YoY, bingo theres your downpayment on the build for the rest of it. Rinse and repeat. Simples innit.

[Bland Unsight]

Agreed. It will be based on forward bookings. That is the way they get the money to build in the aftermath of the financial crisis. In fact, the financial crisis and the lack of finance is exactly why they've turned to overseas investors.

That argument is 100% correct for lots of developments, but, I think, only 50% correct for this Berkeley group development as it is so small and as Berkeley have no leverage. If they are pulling the plug presumably it is informed by the fact that they've not managed to sell as many off-plan as they would have liked, and that they have taken that as an indicator of where the market it at, but that must be coupled to a view of where the market is going, i.e. if they thought it was probably just a blip they'd soldier on.

Edited September 3, 2016 by Bland Unsight

[Patient London FTB]

You're suggesting that the cap on London Help to Buy be raised from £650k to the £2m+ or so needed to have any relevance to this particular development? (h/t Freetrader on the ballpark unit price)

If this is a political play, then stamp duty seems the most likely target. Given how much developers and EAs have been begging for mercy on stamp duty in PCL I think Hammond will throw them a bone in the Autumn Statement.

[Konig]

this Berkeley group development as it is so small

It really is. A whole one half (0.5) of an acre.

But if you Google it you will find they paid £10.05 million for this site, and that was without planning permission to change from office use (though there was a clause to share profits with the vendor - Met Police - if residential permission was granted).

As an aside, myself and the Wife often enjoy a drink in Barnes, usually at the Sun Inn just up the road from this development. So, knowing the locals, and what a blight this site already looks like, we can fully imagine the fury if an 'eyesore' of an unfinished building site is left for any period of time.

And that will be a particularly interesting set of NIMBYS as Barnes is full of A-list celebs (Brian May, Gary Lineker, etc,) as well as top bankers etc.

[porca misèria]

You're suggesting that the cap on London Help to Buy be raised from £650k to the £2m+ or so needed to have any relevance to this particular development? (h/t Freetrader on the ballpark unit price)

Nope. Help to beg is just one of many ways government inflates house and land prices. Money-printing is surely much more important in the higher price ranges. And taxes: someone already said stamp duty.

[Bland Unsight]

Nope. Help to beg is just one of many ways government inflates house and land prices. Money-printing is surely much more important in the higher price ranges. And taxes: someone already said stamp duty.

Money printing. Righto. Just to help me get a feel for your position on this, if they did another £60bn of QE and a quarter point of rates for Brexit, what kind of easing are we looking at for this political move from Berkeley, which I believe people are now calling The Barnes Build Mothballing Manoeuvre? Another £60bn and rates down to zero?

On SDLT, what was the plan there? The slab element was an Autumn Statement 2014 change. Did Berkeley start building with the intention to stop building to send a political signal to the Treasury that it was time to trim the SDLT rates? Hasn't PCL been soft for a while now? Was The Barnes Build Mothballing Manoeuvre a signal from Berkeley that things were going too far?

I think the fate of this development is intriguing, but I also think that there is a massive danger of trying to read things into it beyond the ability of the evidence to bear the speculation. Personally I'm not buying the idea that it's Berkeley signalling to the Treasury and the Bank of England.

[Bland Unsight]

And that will be a particularly interesting set of NIMBYS as Barnes is full of A-list celebs (Brian May, Gary Lineker, etc,) as well as top bankers etc.

Sounds like a sudden conversion to YIMBYism is on the cards, at least until this building site is no longer a building site.

[South Lorne]

Looks like reality is starting to bite...

http://uk.mobile.reuters.com/article/idUKKCN1181N4

...less money launderers around impinges on the whole market in London...

[CunningPlan]

I repeat. It won't be a political move. True, Perrins does have an easy audience with No. 10 but it will all be about the numbers. They are what matter.

[Bland Unsight]

I repeat. It won't be a political move. True, Perrins does have an easy audience with No. 10 but it will all be about the numbers. They are what matter.

I buy that. It's such a rounding error on a massive balance sheet that it's likely a line-by-line thing (from an accountancy perspective). Given what they know now and what they expect over the next three years, the best option for this project for the P&L over the next three years (and thus the balance sheet over the corresponding period) will be driving local decisions. You're looking at a balance sheet that is order of billions.

That said a scan over their annual report shows that their current asset inventories has added a casual £600m and their trade debors £100m, with cash down from £400m to £100m, so they are a good deal less liquid at 30 April 2016. (Which was months before Brexit. DYOC.)

Anyway, it's all nothing to worry about. House prices never fall. Even if they do it just allows the BTL guys to rush in and then jack the rents up, innit.

Innit.

Edited September 4, 2016 by Bland Unsight

[Bruce Banner]

I'm not convinced that Pidgley has handed over the reigns to Perrins in the same way that Weinstock handed over to Simpson at GEC.

[Blod]

They'd like to see the Treasury really get back to pumping the market. Whether it's this development or another one in the shires I know which I would chose if I had sight of their financials and had that choice.

[Bruce Banner]

Cost to completion vs net realisable value.

[billybong]

Even so there's a definite degree of incompetence plus wishful /head in the clouds/special sector/you can't go wrong with property thinking in starting a development and after starting it then finding it's not financially viable especially at this stage in the cycle and with such astronomical prices.

Especially as the downturn in London was evident well before the referendum. A development waiting for a handy excuse to stop. It must also raise questions about the overall financial health of the company.

So Barnes could start to look a bit like places like Greece with developments with their next story awaiting and the rusty reinforcing rods sticking out all over the place.

It's just another variant of the builders' land hoarding which has been so disastrous for the British people and the British economy over the years. Barnes people will likely be grateful for some little relief from the increasingly awful congestion due to more people moving in without adequate infrastructure provision for the increasing numbers.

So much for builder's cooperation in building more new homes and for government policy in that aim. The slightest set back and fall in profit and it grinds to a halt.

Likely it's also to do with the fact that Cameron and Osborne have gone and that Johnson is no longer mayor - some of the main architects of the London house price frenzy in recent years.

Edited September 4, 2016 by billybong