Chairman's Blog

9 March 2009

The broad impact of the recession in housebuilding

Inadequate housing supply creates a number of highly damaging problems – economically and socially.  This year new housing output may be down to a post war low of 80,000 new homes or less. This is just one third of the Government’s annual target.

The obvious implication of the very low levels of housebuilding expected over the next few years is that the supply/demand imbalance, which already existed before the credit crunch, will substantially worsen.  This has significant consequences not just for those people who cannot find a decent home to live in, but for all of us.

The fact that so many developments are not starting means Section 106 planning contributions are not happening either.  A lot of infrastructure will not be delivered including roads and public transport initiatives, schools, libraries and social and community facilities.

EC Harris’ recent report estimates local authorities benefited to the tune of £9billion from Section 106 planning contributions in the financial year to March 2008. This is predicted to fall to £3billion this year and £2billion next year.  This is putting a real strain on council budgets and it is likely that central Government will be asked to fill the funding gap.

Affordable housing contributions have constituted around half the total value of planning obligations secured in England in recent years.  Given that local authority waiting lists rose to 1.77 million households by April 2008, affordable housing is a priority.  However, the call last week by the 2020 Group to spend £6bn on social rented accommodation is a rather short-sighted solution to a much wider problem.

If we are to tackle the current undersupply of housing resulting from the wider economic downturn, a balanced range of initiatives aimed at kick-starting the construction of housing of all types and tenures is required, resulting in long-term solutions. We need a comprehensive approach to the housing crisis rather than a narrow, short-term mono-tenure focus which is likely to create adverse social consequences.

Finally, no blog post would be complete without a plea to improve the planning system.  As the editorial in the FT pointed out on 24 February ‘a significant part of British housing costs comes from the country’s unnecessary labyrinthine and capricious planning process.  Liberalising planning must remain the central objective of British housing policy.’  The recent Killian Pretty Review produced many practical ideas for a more efficient and effective planning regime.  These should be implemented as soon as possible.

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10 February 2009

The impact of recession on regeneration and sustainability

I have been reading with interest in the last few days the Parkinson Report on the impact of the credit crunch on regeneration, the housing market and commercial property.  It is so disappointing that regeneration and sustainable development, which have really progressed in the last few years, are being slowed down and in some cases halted due to the recession. 

Regeneration has made a real difference across the country in the past decade since the Urban Task Force Report and its recommendations were published.  Many of our towns and cities have benefited considerably from regeneration projects, but there is still much to be done.  Sustainability will also continue to feature as an important issue, but progress is likely to be affected. 

The problem is that the significant downturn in the housing and property markets has resulted in lower prices because of fewer buyers and an overall lack of confidence.  Many developments which have been programmed to start are unable to proceed often due to a lack of funding.  As a result of the credit crunch, lenders are generally short of funds and are also lacking in confidence.  If they are lending at all they will only lend on much stricter criteria which can often be to the detriment of urban regeneration schemes in particular.

Some people will be pushing to continue with the development of affordable housing where it is largely being paid for by Government funding.  However, my concern is that affordable housing should be part of mixed-tenure projects as this is very important in creating sustainable communities.  If affordable housing is built separately from private housing it could lead to mono-tenure estates with adverse social consequences. 

We are currently seeking ways and means of enabling regeneration projects to take proceed where we are able to secure financial support from the Government through its Homes and Communities Agency (HCA).  I believe the HCA can play a very important role during these difficult times.  It is also essential that Local Authorities and RSLs work in partnership with private sector developers to find ways to enable projects to start rather than being held over until the recession ends.   

I will post part two of this blog shortly.

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30 September 2008

Huge challenges for commercial property market

The woes in the housing market sometimes hide the fact that there are currently huge challenges for developers and investors across all the sectors of the commercial property market as well – whether it is offices, retail, industrial or leisure.  The downturn is severe with falling property values and rents, increasing yield expectations and limited investment.  Where is all this likely to lead?

• Can we expect more misery?
• When will markets stabilise and settle?
• And what about future prospects?

What we’re seeing at the moment, as a result of the credit crunch, is a complete lack of confidence.  Unless people have to commit to taking a new property or buying a home they are waiting until they’re confident prices and rents have stopped falling.  Well I am a realist, and despite current conditions I’m in no doubt that when the current turmoil has passed there will be a significant need and demand for both commercial property and housing.

The importance of sustainability

However when things change we will be entering a new world so to speak – a world that is becoming more demanding as a result of the sustainability agenda.  The more severe the weather conditions that are being experienced around the world the more people are aware of the effects of climate change with the result that sustainability will play an increasing part in the future of commercial property and housing.

Sustainability is as important to commercial property as it is to residential development.  Some may regard it as an extra cost burden but they will have to accept it is an integral part of today’s agenda that needs to be accommodated.  It is not a short-term issue either – it is long-term.  Sustainability should be embraced and seen as a virtue and a benefit.  After all the more sustainable a building is the more attractive it is to buyers and investors.

Housing developers are already experiencing what is required.  We now have to meet the requirements of the Code for Sustainable Homes with all newly built homes needing zero carbon standards by 2016.  In my company’s case we have been moving in this direction for a number of years through our involvement in particular at the Greenwich Millennium Village in London.  It is going to be important to have more energy efficient buildings in the future.  We also need to make increasing efforts to ensure our commercial buildings are more efficient and cheaper to run.  It is positive to note the development of the Code for Sustainable Buildings and the Government’s ambition that all new non-domestic buildings be zero carbon from 2019. 

More mixed-uses

We will also need to look into other issues such as the way people travel to work.  Somehow we are going to have to reduce our reliance on the car regardless of the sustainability agenda as we’re experiencing ever increasing congestion and our roads will not be able to cope with rush hour demand.  Perhaps by making more provision for public transport, cycling and walking we could reduce the dependence on the car that many sectors of commercial property currently rely on.

For example can we turn new business parks into mixed-use locations where people live and work in close proximity?  Certainly all major commercial property schemes will have to include good public transport provision as a minimum.

In summary, I believe the long-term prospects for commercial property and housing developers are very good for those who can survive the effects of the credit crunch. 

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11 August 2008

Welcome!

My desire to write a blog has come from the realisation that many of the general conversations that we have around the office within Countryside Properties could be of interest to those in the wider world. I have views and opinions on our industry, many built up from my half century of experience in development and some that spring up from conversations during the working day.

This blog therefore aims to express some of those opinions for public consumption and discussion. I hope you enjoy my new blog.

Alan Cherry

The downturn in the housing market

It is now widely known that the credit crunch is having a severe impact on the housing market in the UK. Tighter supply of home loans and stricter lending criteria has had a major effect and has caused a significant downturn in the housing markets.

All this has happened in a relatively short period of time although the first signs were there when the number of new mortgages started dropping in 2007. This has meant that there are fewer house transactions because many would be home buyers are deferring their buying decision until they are more confident that house prices have stopped falling.

The problem is made worse by the exceptional amount of media coverage that there has been on the subject often created by journalists extrapolating limited statistics to represent a wider and sometimes misleading picture. This will take some time to reverse.

The sign to look for is an increase in the number of transactions. This will then allow prices to stabilise before, in time, increasing. However, people’s confidence if they are buying a home is obviously the most important factor and recent research has shown that many buyers’ confidence is currently at low levels.

In my next blog, which I’ll post shortly, I’ll look at the consequences of the downturn for housing supply.

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