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Hit to house building ambitions
A dramatic down turn in new building means a hit to house building ambitions. Read this and other stories in our latest round up of the week’s property news.
Hit to house building ambitions
Despite George Osborne’s boast in the Commons only a week ago that “we are the builders” latest figures show a marked slowdown in new houses which will hit house building ambitions to add 400,000 affordable homes by the end of the decade.
The Markit/CIPS purchasing managers’ index for the construction industry dropped to 55.3 in November from 58.8 the previous month. Although any mark above 50 shows growth, it was the slowest expansion for seven months and well below market expectations of 58.5.
Other than a pre-election blip in April this is the lowest figure for two and a half years.
Affordable Housing Increases
Better news for the Government comes from a report released by the Department for Communities and Local Government which shows that a total of 66,640 affordable homes were provided in England across all tenures in 2014-15, 55% more than the 42,870 supplied the previous year.
The number of homes delivered for affordable rent more than doubled in 2014-15 to a total of 40,710, although homes for social rent fell by more than 10% to 9,590.
Affordable homes for purchase increased by 30% to 16,080.
Overall, the number of homes delivered for social and affordable rent increased 64% from 30,670 in 2013/14 to 50,300 in 2014/15.
No Silver Bullet
Unlike the Lone Ranger (above) who only ever fired silver bullets there is no ‘silver bullet’ to make a successful Private Rental Scheme (PRS) according to James Scott the chief operating officer of developer The Collective.
Speaking at the Property Week Student Accommodation event he said “PRS is not a one size fits all model – it’s a much broader demographic than student accommodation. Sometimes we get hung up on the silver bullet, but a product in Barking is very different from a product in Westminster.”
Asking for government to bring forward policies to support PRS developments he added “There’s a generally understood mindset that PRS is a good product to solve the housing crisis in London, but the government’s policy is all about homeowners. There is a need for policy changes that can help PRS developments go through when they are less viable than developments for sale, because it is an important part of a balanced housing market.”
Purplebricks to be listed
Purplebricks, the online estate agency, has raised £58.1m from an institutional placing as a prelude to its listing on AIM, which will value the group at £240.3m.
The company, whose largest shareholder is the star investor Neil Woodford, has won the backing of institutions including Old Mutual and Artemis Asset Management for the float.
Since launching in April 2014 the agent has grown rapidly securing a market share among the top six national online competitors and trading in shares is expected to start on 17 December.
Housebuilder Doubles Profit
Housebuilder Telford Homes more than doubled its first half pretax profit to £21.0m, from £9.4m, while revenue leapt from £65.1m to £139.6m in the six months to 30 September.
Jon Di-Stefano, the housebuilder’s chief executive, said: “A fundamental lack of supply of homes in London is contributing to strong demand for our properties in non-prime locations. As a result we have a sector leading forward sold position which gives the board exceptional visibility over future profits and cash flows.
“Our recent acquisition of the regeneration business of United House and an equity placing raising £50m are important steps in delivering on the board’s longer term growth targets.
“We will continue to invest the placing funds over the next few months, having already acquired a substantial site with planning permission for 206 homes, and the board is very confident in the prospects for Telford Homes over the next few years.”
Holloway Prison focus of major row
A major row is brewing between the government and Labour-led Islington council over the proposed sale of Holloway Prison.
Last week Justice secretary Michael Gove announced plans to close Holloway Prison in north London as part of the Ministry of Justice’s prison modernisation programme but this week Islington council said it had “a number of concerns” about the government’s plans for the prison
The council is already working on a planning brief for nearby Pentonville Prison, which has been earmarked for closure under the government’s plans.
Paul Convery, Islington council’s executive member for community safety, said the council would now rush to pull together a brief for the Holloway site.
In an interview with a local paper he said “I expected Pentonville to be put up for sale because it is overcrowded and too expensive to maintain and we are already working on a planning brief as part of which we have identified a future use. We will quickly draw one up for the Holloway site. We will be making a very strong case that there should be affordable housing and not a windfall for private developers to build luxury flats.”
The government, which is committed to selling off £4.5bn worth of public assets over the parliament, including £640m through the Ministry of Justice, is likely to want to maximise the value of the sale of the land. But a high valuation will limit the amount of affordable housing provision
“We have a number of concerns over the plans to close prisons in Islington,” said James Murray, Islington council executive member for housing and development. “If these plans go ahead, then it is absolutely essential that any housing built on the sites must include a decent level of affordable homes for local people.”
Change of Heart?
Back in August London Mayor Boris Johnson was pushing forward a proposal for a flat rate of 25% for affordable homes on all strategic development sites, housing opportunity areas and future housing zones in the capital. If imposed, he argued, the policy would do away with all the wrangling between individual boroughs and developers over affordable housing contributions and significantly streamline the planning process by removing the need for developers to prepare lengthy and costly viability assessments.
But as the proposed 25% rate fell well short of the 35%-50% target favoured by most London authorities in their core policy documents senior Labour figures in London vehemently opposed the proposal and Johnson subsequently backed down, pledging not to impose a “top-down” target across the capital.
However, there are now indications that several leading Labour town hall bosses are softening their stance on the proposal.
During a discussion at last week’s London Property Summit the leaders of Hackney, Southwark, Barnet, Croydon and Hammersmith & Fulham (four Labour, one Conservative) were asked to give their perspectives on the development process.
All lambasted developers over their attitudes to providing reasonable levels of affordable housing. Jules Pipe, the mayor of Hackney declared that “we are in a place where some developers treat planning policy with contempt. I don’t expect bookmakers to consider the public good. But I expect something more from developers. I expect them to at least meet me half way.”
At the heart of the politicians’ frustrations was the viability assessment process, in which they admitted they are consistently outgunned by developers. At a time of drastic cuts to council budgets, developers can easily afford to outspend and outmanoeuvre councils when it comes to access to expert consultancy and legal advice.
As a result the possibility of an across the board flat rate is back on the agenda.
“A flat rate is worth exploring,” said Pipe. “We are coming round to it because we’re so sick of getting turned over.”
With a mayoral election in May next year, there is little probability of any change in the current system in the short term. However when high-profile Labour leaders are willing to publicly signal a change of direction, it is at least likely to be an issue for debate between the mayoral candidates.
Summary of Chancellor’s Autumn Statement
Although the headline announcements were the promise of the biggest housebuilding programme since the 1970s and the new additional 3% stamp duty levy on the purchase of additional properties and second homes there were other key measures affecting the property world:-
Londoners helped to buy
London homebuyers will get a turbo-charged Help to Buy scheme, with the shared equity loan raised from 20% to 40%. As a result buyers in London can fund their purchase with a 5% deposit and a 40% loan from the government that is interest free for five years – meaning a mortgage will initially only need to cover 55% of the value of the property.
Public land sell-off
Government departments have agreed to sell an additional £4.5bn worth of surplus land and property assets which the government said would deliver 160,000 homes. A new government body will be .set up to take ownership of the public estate. It will act as an asset manager and will charge departments “market-level rents for freehold assets they currently own”. The first assets to be transferred into the new organisation, which will be in place by March 2017, will include freehold office, warehouse, storage and depot properties.
Capital gains tax window
Capital gains tax due on residential property is currently paid between 10 and 22 months after a sale, but from April 2019 that window will be hugely curtailed to just 30 days after completion of the disposal of any residential property.
The government will bring forward plans for a “more standardised approach to viability assessments and extend the ability to appeal against unviable section 106 agreements to 2018”.
In an effort to improve the performance of local planning authorities the government will intervene if planning authorities have more than 10% of major decisions overturned on appeal. There will also be a new delivery test for councils to ensure delivery against the homes set out in local plans “within a reasonable timeframe”.
(Based on the Department for Communities and Local Government’s (DCLG’s) latest figures seven councils had more than 10% of major decisions overturned on appeal in the two years to December 2014.)
Green-belt controls loosened
Planning policy will be amended to back the development of “previously developed brownfield sites” in the green belt by letting them be developed for starter homes in the same accelerated way as other brownfield sites.
Further council cuts
The DCLG is facing further cuts of 29% over the course of the parliament, while councils are facing reductions of £6.1bn by 2019-20. But Osborne also said local government would be able to keep the receipts of the sale of public assets to reinvest – and confirmed plans to consult on plans to allow councils to keep 100% of the business rates raised in their area. The government will consult on changes to the New Homes Bonus scheme, “including means of sharpening the incentive to reward communities for additional homes”.
New enterprise zones
There will be 18 new enterprise zones – 15 of which will be in “smaller towns and rural areas” – and eight existing enterprise zones will be expanded. Seven of the new zones will be in the North of England.
Council estate regeneration
Osborne unveiled a new £2.3bn loan programme to finance the regeneration of large council estates, as well as supporting infrastructure for new housing – £310m of funding will be provided to support the 15,000-home Ebbsfleet garden city development.
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