Huw Morris,
PlanningResource,
13 March 2009
House builders will become more conservative and turn their backs on major regeneration schemes in response to the recession, according to research today.
An investigation into the future of residential development by Knight Frank suggests many house builders that survive the recession will look to smaller scale developments particularly on greenfield sites.
Cash-rich developers are already seeking to build lower density family homes when the market returns to strength.
“The financial pressures on the industry will mean that it will be a lot smaller – in terms of skills and capacity – over the next few years,” predicted Knight Frank’s head of development research Jon Neale.
”Many in the sector blame its current problems, whether rightly or wrongly, on over-involvement in regeneration schemes.
“Consequently, it will not only be less capable of delivering the numbers of new homes that the government requires – it will also be less prepared to deliver them in the forms and places that planning policy has encouraged. It will try to revert to its ‘comfort zone’ of developing smaller numbers of larger homes in more suburban locations.”
Volume builders are putting large amounts of their assets up for sale, with new buyers such as sovereign wealth funds, speculative investors and wealthy individuals, entering the market.
“This transfer of land, much of which is earmarked for development in local planning documents, could have real implications for the industry,” Neale added.
“Land values have fallen by as much as 70 per cent in some areas, although 30 to 50 per cent falls are more typical. It seems unlikely that they will quickly bounce back to peak levels. Many new investors may choose to hold onto their purchases, waiting for better returns, which could block development and further reduce housing supply.
“Others could choose to develop the land themselves in phases, attempting to build value by providing a high-quality urban extension or new settlement, using house builders or, possibly, construction experts and contractors to build the homes.”
huw.morris@haymarket.com
