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Which way, up or down will prices go this year?

Asked on Apr 26 2011, House Prices in Street | Report content

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  • Personally I feel upwards as there is still a healthy demand for property, a shortage in some areas.

    Answered on Apr 27 2011, Report content
  • Plot Price Pressure as Planning Permits Plummet Planning Permits Falling (That’s as good a “Peter Piper”!) With planning permits being granted at less than 50% of what they were 4 years ago, price pressure on available land has to be up, which means the pressure on house prices must also be upward. According to the latest HBF Glenigan report only 33,000 house permits were given in the last quarter of 2010, 22% less than the year earlier. … and House Completions Down Meanwhile, latest Government figures show 2010 house completions 13% lower than 2009 which alone was the worst since 1923. Here it is worth noting that the Government’s current calculation of a 1 million shortfall in housing stock is 5 times higher than the 200,000 post war shortage anticipated by Churchill in 1944. Housing Crisis Deepens Combine this with the fact that getting planning permission can take 3 years, the fall in permits coming through, the need for over two hundred and thirty thousand new homes every year for the next twenty or more years, added to the already desperate need for over a million new homes at the moment, and one can easily see that the UK housing crisis is deepening. Now a New Local NIMBY Threat As if this were not bad enough, the Localism Bill, which gives greater powers over the award of planning permits to potentially NIMBY local communities, is likely to see further reductions in the supply of development land coming forward – at least in the short term. Predictions Where is all this heading? 1. House Prices Will Spiral Upwards With less developable land coming available and, as indicated above, price pressure on land with Planning Permission increasing, 1. House prices will rise 2. The rate of new house building will slow below the current 100,000 p.a. or so as firms conserve land stocks and wait for price improvement. 3. This slowdown will be tempered by the need of national volume house-builders to increase their operating margins above the current 5%-6% levels currently being reported (and this only after having written off millions from their land values a couple of years ago) 4. Loss of industry and trade skills capacity resulting from this severely reduced output will put further downward pressure on the industry’s ability to build more homes. 5. This loss of capability will prevent any rapid recovery in conventional house building output. 6. As market recovery comes, attempts to increase output will enable remaining trades people to demand cost increases, placing greater upward pressure on house prices. 7. Combined with the shortfall in required annual output, per Government figures, of 130,000 p.a. (230,000 required – 100,000 actual), the 1m house deficit will increase to over 2m by 2020 8. All of the above will continue to be further impacted by new regulations which demand higher and more costly house building provisions. All of the above will occur UNLESS drastic action is taken to both release land and finance AND new systems to facilitate output are encouraged. 2. Interim Provision In the aftermath of WWII, Britain saw more and more of the following:- 1. people ‘house-sharing’, either by doubling up with parents and friends, or by renting ‘bed-sitters’ in someone else’s house where, possibly, a kitchenette was added to a double bedroom and the bathroom was shared with the house owners. 2. The rapid growth of residential caravan sites 3. Conversion of former military camps for housing 4. Provision of ‘Pre-fabs’ Note: Although the Housing (Temporary Accommodation) Act of 1944 planned for 300,000 to be built over the next 4 years, only around 150,000 were built, spread across some 23 types of provision) While all of these were supposed to be ‘temporary’ measures, the residues of various of these can still be seen around the country. In at least one respect Britain is already seeing a return to this situation, as young people – unable to raise the huge 35% deposits needed to get a foot on the housing ladder – have no alternative than to ‘double up’ as did their grandparent predecessors 60 to 70 years ago. I predict that, in large measure due to Government failure to address the increasing complexity and bureaucracy at the root of this crisis that:- 1. This trend return to “Cathy Come Home” bedsitter land will continue 2. The UK may see an increase in the number of illegally built or sited residential accommodation. This may take the form of holiday homes being used permanently, or more residential caravans being crowded onto sites, and an increase in ‘squatting’ in any vacant property, including offices and factories. 3. There will be an increase in applications to significantly increase the size of many existing ‘parental’ homes to add “Offspring Annexes”, where possible turning single household residences into multi-generational homes – along Central European lines. 4. This may need Government direction or legislation to cause local authorities to grant such permits, or even class them as ‘permitted development’. 5. Alternatively more ‘Offspring Homes’ will have to be allowed on garden areas. 6. Without this, the UK’s Town & Country Planning system will fall into even greater disrepute. 7. Under increasing pressure, Government will be forced to find ways to release sufficient land to at least contain the worsening housing crisis. 8. One means of doing this will be to direct Local Authorities to create, pre-plan and release ‘exception sites’, particularly in rural areas. 9. By soon after the next General Election, i.e. 2015-16, Government will be forced to implement a total overhaul, if not replacement, of the current planning system which today bears little if any resemblance to its original 1947 concept. 3. Off-Site Standardisation As noted above, the UK’s post war housing crisis was solved in part by the provision of residential caravans and pre-fabricated houses. Both followed industrialised forms of production, the latter being both imported from the USA and made in vacant wartime production facilities. Both worked to standardised designs and, in the case of the pre-fabs, common standards developed by the Ministry of Works. In the main the 1940 and ‘50s‘ prefabs were significantly more expensive than traditional brick & block ‘wet build’ houses. Many people also considered them to be aesthetically unattractive and deprived the architectural profession of cherished freedoms to be ‘creative’. However, most of them have outlasted their targeted 10 year life by 6 or 7 times and, it seems, could go on longer. I predict that, with modern factory produced timber frame housing having demonstrated its ability to hold its ground with, and make increasing inroads into, the bricks and mortar new home market:- 1. One or more national volume house-builders will move toward even more standardised house designs assembled from ever more factory made sub-assemblies. 2. In doing so there will be an increased tendency for them to establish their own (limited) production facilities. 3. Over time, these will be supplemented by outsourcing to independent sub-contract, fixed price sub-assembly manufacturers. 4. There will be simultaneous moves from current off-site manufacturers to provide complete standardised ‘turn-key’ houses for sale to whoever has the land on which to put them. 5. Housing Architects will be subsumed within an already emerging integrated profession capable of delivering quantity with quality at the same time as addressing production, Health and Safety, CDM, Sustainability and the raft of other regulatory measures demanded by Government.

    Answered on Apr 28 2011, Report content

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