Historically there have always been suspicions that UK housebuilders were sitting on enormous land banks as a means of pushing up the value of property. There have been various attempts by governments over the years to reduce these land banks and incentivise housebuilders to build more homes. However, a recent report by the Guardian suggests that the UK housebuilding sector may be sitting on valuable land which could make a make a significant dent in the UK housing shortage.
So, what is happening?
It would appear that UK housebuilders are currently sitting on land banks which could easily accommodate 600,000 new homes. There is some debate as to the amount of these plots which have planning permission but Taylor Wimpey alone has admitted to owning 75,000 plots with planning permission. If we were to replicate this trend right across the sector we can only guess how many plots are “ready to go”.
The Lords economic affairs committee has opened up an inquiry into the UK housebuilding market and the number of plots which are available for immediate use. It is worth noting that the industry itself has hit back at claims of “stock piling property” suggesting there is no reason why they would not start building if they could. In many cases the land is already paid off before building begins and therefore it is only after new build homes have been sold that they can realise any return.
Where there is interest in real estate there is no doubt that speculators will attempt to make a quick buck. As a consequence, we may see further investigations into accusations that London property is currently being acquired by speculators hoping to flip their investments for a significant gain. Quite what the authorities can do to stop speculative investment remains to be seen because we operate in a fully transparent and open marketplace.
At the end of the day, while speculators may be targeting the current “property hotspots” there is no guarantee they will be able to crystallise a return on their investment. It seems that only in the good times do the authorities take a dim view of this particular type of investment. Are they trying to deflect blame for the current housing shortage?
While there is no doubt that the land banks capable of accommodating 600,000 new properties in the UK would help to fill the newbuild gap, is this really feasible? If suddenly there were 600,000 new properties on the UK housing market how would this impact the general trend in property prices? Would we see further concentration upon London and other more lucrative property markets leaving many other property markets neglected?
The fact is that for many years now governments have known about a significant shortage of new builds across the UK. This has not stopped them from introducing an array of taxes, to reduce investment returns for housebuilders and property investors, as well as bring in various environmental hurdles. It is very easy to shine a light on the UK housebuilding market when demand for UK property is fairly strong but why were they not hurling the same accusations at the sector when the UK economy hit rock bottom?
The truth is that housebuilders need to plan ahead, they could well be land banking property which they may develop or sell on but what is the government really doing to help their core business?