Well, doesn't this just bugger Peoples' QE?
England's housebuilders will not be able to build the homes the country needs, even by 2020, a former Bank of England policymaker has warned.
Speaking before a House of Lords committee, Dame Kate Barker said that the country needed around 300,000 new homes a year, but admitted the industry would not have the capacity for years to come.
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29 thoughts on "Well, doesn't this just bugger Peoples' QE?"
Ralph Musgrave December 2, 2015 at 8:20 am
Sorry Tim, but you're out of date. Murphaloon's latest is "Climate QE for Paree". Next it'll be "QE for daffodils", followed by "Kitchen cupboard QE".
Andrew M December 2, 2015 at 10:10 am
We managed to defeat Germany in four years (and again in six years); I'm sure we could build a million houses by 2020, given the right incentives. But we're not going to see anything near the level of incentive required.
Van_Patten December 2, 2015 at 10:11 am
Ralph Musgrave
He tried to diversify with his 'capital safe havens' strategy – oddly seems to have gone the way of the Fair Tax Mark! I am reminded of this sentence when I picture Murphy fat fingering the keyboard in his Norfolk bunker:
'Maybe the world would have been saved a great deal of trouble if ……… could have been given a job in some German equivalent of Chatham House where he could have speculated harmlessly for the rest of his life;'
You can probably guess the missing word if I tell you the sentence is taken from 'The Origins of the Second World War' by A.J.P Taylor – thanks the Lord he doesn't have any real power as yet!
So Much For Subtlety December 2, 2015 at 10:12 am
Ralph Musgrave – "Murphaloon's latest is "Climate QE for Paree"."
Is that where the government prints more money so that each and everyone of us can replace our cars with four stout lads carrying us in a sedan chair?
I mean, come on, who could object to that? Think of all the jobs it would create!
Tim Newman December 2, 2015 at 10:14 am
I'm sure we could build a million houses by 2020, given the right incentives.
If we accept the traditional British housing quality standards then yes, I'm sure we could.
Well we will have no choice. We will have to. After all Gideon's idiotic budget calls for another million immigrants.
Jim December 2, 2015 at 10:48 am
"We managed to defeat Germany in four years (and again in six years); I'm sure we could build a million houses by 2020, given the right incentives."
Its not the incentives, its removing the disincentives. If you applied the same rules to building a WW2 airfield, barracks or gun emplacement that are applied to building houses today then the war would have been over by 1940 as we'd have built no defences at all. Its not financial incentives that are required, its allowing people to just get on and do things without producing mountains of paperwork.
Its ironic that the housing in the UK that is in most demand (and highest priced) is often the housing that was built by before the 1948 Town and Country Planning Act and the housing built after that is less desirable.
The Meissen Bison December 2, 2015 at 11:10 am
We could always try easing the quantity of people and then there'd be less demand for housing.
DBC Reed December 2, 2015 at 11:14 am
This would be Kate Barker of the infamous Barker Review of 2004 which recommended a myriad of planning and development agencies all carefully cross coordinated and totally negated by her proposed Planning Gain Supplement which was a tax on land value uplift only after development was completed: the complete opposite of the land value tax that Diogenes has outlined with stunning impact on here which would force land speculators to develop land instead of sitting on it while its price goes up , a problem which the Barker PSG would have nothing to address.
She bears some of the responsibility for the country's backlog of unbuilt houses being now beyond control.
bloke in spain December 2, 2015 at 12:46 pm
@DBC
Explain how one can make more money "sitting on it (land) while its price goes up" rather than building on it, go buy some more, rinse & repeat. I'd be fascinated.
bloke in spain December 2, 2015 at 1:00 pm
It's an argument that says no-one would ever build anything, because the longer they didn't build the more their land would be worth. They wouldn't have to bother doing the messy, expensive thing of building houses. It'd be "(Nothing But) Flowers" (Talking Heads)
Just realised… Hey Tim! Why are you sweating your bollocks out in Czecho, trying to extract rare earths from slag heaps? You know they're in there. S' good enough. DBC reckons all you've got to do is sit on your pile whilst their value increases, due to scarcity. Just the read your paper & scratch your arse, once in a while. No need to add value, whatsover.
Diogenes December 2, 2015 at 1:22 pm
Bis, because it takes 4 years on average to get permission to build, the house builders all sit on 4-7 years of land. They all say so explicitly. They control the supply of housing so that prices steadily increase. This is fact. They are at pains to explain the process in their annual reports. Persimmon's chairman boasts of his land bank in a way that is obscene. Be as dismissive as you like, have you tried to construct houses from new in this country? Local authorities make it almost impossible. Reading the annual report of Barratt was like listening to the rustle of £20 notes being counted in a council office.
Bis, a company in Spain has spent the last 10 years trying to reopen the Río Tinto copper mine. The permitting process is complex and expensive. All the people who need to be greased with money. After 10 years of toil, all the permits were in place and the copper price collapsed. Them's the breaks.
"…have you tried to construct houses from new in this country?"
It's what I do.
Think of the cash tied up in 7 years of stock. Either you control house pricing to maintain cash-flow or else you go bust.
The market is wide open for you, then, BIS. While Barratts, Taylor Wimpey, Persimmons etc dribble out 5000 houses per annum, you could build as many as you like and clean up. I wonder why no one has tried it.
"you could build as many as you like and clean up."
if you had the builders?
Said this before, but worth repeating for the desk jockeys. Building isn't like law or accountancy. You want a lawyer or an accountant, run your finger down yellow pages & you'll have one phoning you before you can phone him. Anyone can be a lawyer or accountant. Anyone is. They're like fleas on a dog.
Ring for a plumber & you may find one who'll come round week on Friday. Maybe.
Unis can churn out lawyers & accountants to order. Three years & a plumber's just worked out what a 22mm male endfeed adapter's for.
john77 December 2, 2015 at 3:22 pm
"have you tried to construct houses from new in this country? Local authorities make it almost impossible."
So it's all the fault of the bloodsucking Tories and the capitalist running dogs working for Barratt!
GlenDorran December 2, 2015 at 10:16 pm
Agree totally. I'm a desk jockey and most of my mates are. We're all looking at job cuts and thinking about how long redundancy payments would last.
A lawyer friend's husband is a joiner (but does a bit of everything when required). He phone is ringing off the hook and he can pick and choose which work he takes on.
diogenes December 3, 2015 at 1:11 am
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/311515/House_Building_Release_-_Mar_Qtr_2014v3.pdf
BiS…it is a good point that capacity in the house building market might have been lost. But in the 3 years prior to 2007-8, 180,000 houses were being started per year and 170,000 were completed. Since then, we continue at about 120,000 completions and starts.
Did 30% of the house building capacity of the UK just evaporate?
I can accept that builders/leccies/joiners died but 30%? Without replacement?
I await a better explanation than mine…that house builders are dribbling out a supply of houses to increase prices.
The supply curve seems to be comparable to a vertical line….so the increase in demand feeds directly into prices.
"Completions –year ending March 2014
112,630 houses were completed in the 12 months to March 2014. This is 4 per cent higher than the previous year. The current level of completions is 36 per cent below the peak level of 2007. Private enterprise housing completions were 6 per cent higher than in the year before whilst
completions by housing associations remained stable (0 per cent change)over the same period"
and this at a time when there is massive demand for housing…excplain that, please. And 36% below 2007….has this much capacity really been lost?
What is preventing foreign building companies coming into the UK and building those houses? (Perhaps it is planning permits and the counting of £20 notes in council planning offices)
Andrew Carey December 3, 2015 at 9:43 am
Interesting stuff diogenes, cheers
The ONS has data on employment numbers in different sectors. Construction employment is down from 2300k in Dec 2007 to around 2100k in Dec 2014. If housebuilding is down by 1/3rd or so then some other areas must have picked up to explain those numbers ( or the industry is less productive ).
Anecdotally there seem to be more residential/care homes. And the empty homes data shows a reduction from 783k empty units in 2008 to 610k in 2014, of which a third have been empty more than 6 months.
I guess that means a lot of renovation work has been going on.
OK Diogenese, let's look at the years following 2007.
"The 20 biggest UK house builders have collectively posted a profit for the first time in four years.
"It has been a long road back, but the UK house-building sector is finally starting to make money again. The top 20 house builders have returned a healthy aggregate profit in 2012 of £538.7m – four years ago, they lost almost £4bn. In 2008, as the housing bubble burst spectacularly, the house-building sector imploded with such force that the survival of many of its biggest names seemed unlikely. "
http://www.theconstructionindex.co.uk/market-data/top-20-house-builders/2012
Now, bearing in mind the sort of leadtimes I mention above, what sort of capacity would you expect a building company in 2011 to be planning for in 2015?
My own personal view of this is it's not the big housebuilders that are the problem but the entire way house building is financed.
Think. There's only two important players in this. Guy who wants a house to live in. Guy to physically build it for him. leave it just between those two & houses would go up starting at under £50k. As Tim repeatedly says, land's cheap. it's the planning consent costs money. Building basic houses is cheap. Building them with all the non-optional bells & whistles building regs stick on, isn't.
But the price can only be what money's available to pay for it. You cant sell a bloke with a pound in his pocket a £2 loaf of bread.
Except, with credit creation producing almost limitless supplies of money the price can be anything you want it to be. It's a self feeding process. The credit's secured against a property value based on how much credit was available to purchase the previous house was sold. It's insane. The only people who benefit from this are the credit creation industry & those closest to the fountain of money.
It doesn't have to be like this. My great, great grandfather was one of the people responsible for putting up those Edwardian terraces you all love so much. He paid to have half a street built. A dozen houses. With his own money. I suppose for the rental income. An investment. According to the old deeds, they cost him about £400 a piece . Or at least the covenants on the land state " a house to be built for not less than £400″, so I suppose they were working with real figures. This was how the central core of most UK cities were built. Mostly equity. it was great, great grandfather's cash. a product of the old chap's earnings. Not a loan in sight. Regrettably, all those houses were sold over the years (or as the last surviving member of the family I'd be as rich as Croesus now 🙁 ) Most of them for modest sums, in real terms of the times. Couple of years earnings for the people who bought them.
Those houses are half a million a pop, now. Beyond the means of any but high earners.
Where does all this wealth accumulate? Some of it accrues to owners of property. The houses they live in. But this is fantasy money. The value of the roof over your head isn't any use to you, if you need the roof over your head. It's only if you can cash out. Most accrues to the credit creation industry & it's hangers on. The banks charging interest & arrangement fees on the loans. The estate agents who charge on a %/value basis. And particularly those big housebuilders with their preferential access to the credit creation.
Back in great2 grandfather's day houses were often funded by the builder who built them. Spec build. Why there's often one house in the street got the wide access the the rear & a bit more frontage. That was his one. The builders who get their hands dirty & build houses, now, are the bottom of the food chain, on day rates. There's no way they can access the sort of credit enable them to buy land, sit on it whilst the planning process wends it's tedious process & pay for the construction. Most of the profit's going to the men in suits. Yes, that includes the big builders you're bitching about. But that's the way the game's been set up.
This is why your gripes over "land banking" don't impress me. Looking from the house builders' point of view, those self-congratulatory reports on how well they've done just show how well they've managed one of the inputs to their business. In house building, land is as much a material as bricks & timber. You need something to stand them on. And having built & sold a house, you need to buy all three, again, to build the next one. At today's prices. if you were selling land at yesterday's prices, you wouldn't be building many houses in the future.
diogenes December 4, 2015 at 12:39 am
BIS the point is…thes guys are not building houses to fulfil demand…it is a steady supply against a backdrop of increasing demand
a near-vertical supply curve when the demand is rising….according to you, some opportunist would be in there building houses and gaining superprofits. However, the status quo continues. I await your explanations since you disdain mine.
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