Barratt Homes said yesterday it is struggling in London – an admission that came as no surprise. The housebuilder is one of several to have jumped on the London bandwagon in the first half of this decade, merrily buying up land all over the capital as house prices whooshed upwards.
But its first half results, published yesterday morning, suggest the party has come to an abrupt end for London developers. This should sound a note of warning to the government ahead of an eagerly-awaited housing white paper.
Barratt’s results showed completions were down 56 per cent in the six months to the end of December.That was despite “pricing action” on top-end homes it rather sheepishly admitted to at the end of last year. The figures came a day after Foxtons, the Mini-loving estate agent which focuses at the top end of the London market, said sales had fallen 40 per cent in the year to the end of December, pushing revenues down more than 10 per cent.
After almost a decade of good times, house price growth in the capital is stalling and property firms are battening down the hatches. Figures published by the Royal Institution of Chartered Surveyors in December suggested house prices had stagnated in the capital. It is not just Barratt which has reported challenges in London - even famously shrewd Berkeley Homes reported flat sales in London and the South East in its first six months.
The risk is as prices in the capital stagnate, so too will builders’ enthusiasm to develop the land they bought at the top of the market. Minister Sajid Javid has already bemoaned a lack of competition in the housebuilding sector and lashed out at the big developers for sitting on their land banks. As an avowed free-marketeer, Javid’s task is to understand why, over three to four decades, the housebuilding sector has become considerably more oligopolistic, coinciding with a damaging slowdown in supply. Have longstanding government interventions – the reams of red tape, the complex restrictions in areas of high demand, the monetary doping – warped the sector?
Javid acknowledges the UK’s acute shortage of housing. After years of false promises and meaningless tinkering (from Labour and Conservatives alike), the new white paper must present a clear plan to reconstruct the foundations of the sector so that it can efficiently respond to Britain’s long-neglected demand for new and better homes.