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An interesting article posted on the well-respected 'Construction Index' website recently highlighted the fact that the top positions of the plc housebuilders have been changing places in recent years as they deal with Coronavirus, increased costs and the ever-present challenge of developing more 'greenfield' sites to meet the demand for houses rather than flats - 'trapped in a flat with higher insurance costs, no garden and the fear of fire..' - well buy a new home on an estate in the countryside and enjoy garden, fresh air and space..'
The Construction Index analysis showed that 10 of the top twenty companies saw profits decline last year. With new blood (ex-Persimmon boss Jeff Fairburn invigorating housebuilder Avant Homes, the huge rise of the land promotion companies in the last 10 years and the changes which have already started in terms of how new homes are physically built (or should we say delivered on a truck nowadays) and it is clear that the industry is going through some interesting changes. Watch out for the regional family firms - the Davidsons Homes and Hill Homes, the growing capacity of the 'old' Housing Associations who are now full-stream private and social developers (the Keepmoat, Catalyst, Kier and Orbit of this world) together with the growth of companies like Legal & General Homes (L&G). It seems highly likely that if L&G make a great success of their homes business then more of the large financial institutions may follow and sooner or later some of the large US or Middle-East based capital houses will start injecting money into the sector if profits continue. Well, until a Labour Government brings in new taxes on land sales. https://www.theconstructionindex.co.uk/news/view/house-builders-start-to-struggle
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Industry sources which Landsite has recently been speaking to are saying that land with planning for residential development is being competitively priced as the Coronavirus 'lockdown' eases.
Two major plc housebuilder Land Directors have separately told Landsite that they have witnessed sites being sold for record prices in recent weeks and one Managing Director has confirmed that he has been informed by colleagues in charge of other Regional Offices that they think land prices are rising as competition for the best sites increases. Se this against the slow, slow world of planning and the restrictions of the greenbelt and it is no surprise that the housing land supply for a growing number of District and Borough Councils is falling below the important 5-year supply deadline/requirement. Land prices per acre which may be currently around £750,000 per acre (with planning) may therefore begin to edge towards the magic one million pounds per acre mark soon. For some latest news on prices see : www.housingtoday.co.uk/news/residential-land-value-grew-in-fourth-quarter-of-2020/5110122.article https://mspcapital.co.uk/land-development-prices-on-the-rise/ www.savills.com/research_articles/255800/310310-0 What does this mean for prospective landowners who have land with potential for residential development ? Well good news in that not only will land values keep rising for land with planning permission but the offers to enter into Option Agreements of Promotion Agreements with the Land Promoters, housebuilders and developers will be ever more generous and competitive in order to persuade landowners to run with their company rather than another. There are probably over 150 land promotion companies in the UK today varying in size from large, plc-backed firms employing perhaps 30+ specialist staff to smaller one-man businesses with some family or private funding behind them. |
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