| Topic: | Re:Re:Re:Re:Re:Re:Re:Re:100,000 Children homeless - Paul O'Grady | |
| Posted by: | Cllr Sam Hearn | |
| Date/Time: | 25/09/15 14:56:00 |
| "There are 270,000 unimplemented permissions for new housing in London because most are held by bulk house builders who are holding them back to prevent prices falling." Having long ago worked in the house building industry and having friends who still work in the industry I find this logic childishly simplistic and really very silly. Whilst at some stages in the economic cycle this might be true I do not think that is the case at present. Obviously whilst interest rates are low it is less painful than it might otherwise be to "hold land". There will however always be exceptions to the rule. It is a truism that "builders build things". House builders need land banks - without them they cannot build anything and cannot guarantee a steady flow of work for their businesses (and cash to pay dividends). If you wish to maintain the quality of your end product, comply properly with a host of sensible regulations and avoid over-trading you can only expand your building capacity incrementally. You can go from having no land bank to have permission to build 910 housing units overnight. You cannot gear up and build 910 housing units without recruiting new employees, moving people from other projects, completing enabling works and placing orders for materials (some with long lead times). House building is very risky particularly when you are working with borrowed money. It is extremely easy to go bust even when making a paper profit because your bankers "have read an article in the Evening Standard" and decided to pull the plug on your overdraft. The way to speed up the "planning to build cycle" is for interest rates to rise. No one wants to fund a land bank on expensive borrowed money unless there is a real cash flow from completed developments. Higher interest rates will also choke of demand, keep house price rises in check and increase the number of distress sales by those who over leveraged themselves. |