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Prices fell in Ireland (and Spain and lots of other places) because supply was higher than demand. They built more houses than there were buyers. There are houses built in such places in 2007 that have still never been lived in.
There are plenty of towns in the UK where you can buy a second-hand house for less than it would cost to build it new, even if the land were free, which it never is.
https://www.rightmove.co.uk/properties/130187429#/?channel=RES_BUY
That house does not supply good vibes ofc, so you are right.
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Totally agree, too many components to both supply and demand that it’s hard to talk about in simplistic terms (apologies if my comment was a bit reductive).
@Hefty, this always seems to be in the news during housing downturns, but private sector new and net developments have been strangely consistent for the best part of 50-60 years, with housing inflation totally outstripping any change in development numbers.
Housing being one of those wicked problems, it’s hard to talk about only a small slice of it without it bleeding into too many subjects…
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Prices fell in Ireland (and Spain and lots of other places) because supply was higher than demand. They built more houses than there were buyers
I would tell you a different story which focuses on effective demand as the key driver, with supply as a sideshow. Very aggressive bank lending at high LTV and income multiples massively increased the spending power of the population (both owner occupied but crucially BTL). When the banks blew up, lending stopped, no-one could afford to pay the old prices and demand evaporated.
It's not a story of 1,000 households wanting to live in a particular town and the housing stock expanding from 900 to 1,100 dwellings to drive down prices.
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https://www.rightmove.co.uk/properties/130187429#/?channel=RES_BUY
That house does not supply good vibes ofc, so you are right.
Agree that this has bad vibes, but I think it's so cheap because of the required repair cost and low density, not because the land value is necessarily negative.
Interesting to speculate but I reckon at zero land cost you could throw up a block of flats profitably in this location. Or maybe could have done before 2022 inflation.
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But, I mean, that’s still demand.
In the 2008 crash impossible to separate the drop in demand and tightening of lending. The two were in the same death spiral feeding off one another.
But it very much was a story of fewer people wanting to live in an area than there were houses for sale.
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The houses usually get built one way or another, though? Even if the bank has to intervene and wipe out the original developer's equity.
Not really. The thousands of houses at the bottom of my garden, a new southern suburb of Cambridge, were due to be built in 2008. They started them in 2013, once the market started to climb again.
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But, I mean, that’s still demand
Yeah I agree, I just don't really think the supply side was particularly important back then. I think it probably is important in Dublin today, as the whole construction industry went into NAMA and nothing got built for 15 years, but that's another story...
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Interesting to speculate but I reckon at zero land cost you could throw up a block of flats profitably in this location. Or maybe could have done before 2022 inflation.
Possibly. But no one’s going to sell you the land for nothing. They’ll keep it until it’s worth something. And since it usually takes 2 years from start to finish no one’s going to invest the cost of building unless the return on investment is 20% or more.
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Possibly. But no one’s going to sell you the land for nothing. They’ll keep it until it’s worth something.
That's why I think the solution for this kind of deeply outdated, inefficient housing stock is council-led compulsory purchase. Who wants to live in the one renovated house in a street of grow houses? I think they managed something similar in the Welsh Streets in Liverpool but I can't claim to be an expert.
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Naw.... Home Sec Yeah!
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My strong suspicion though is that Cambridge resi land didn't become unviable in 2009, it just became unviable at 2008's land value. Or the landowner thought they'd make more cash by waiting.
Going back to the original point, I really don't think that example supports the argument that more house price growth would lead to more building in the UK.
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For sure. It does happen and can work.
They knocked down streets and streets of Victorian and Edwardian houses in Cambridge city centre to build a shopping centre in the 80s, when a new Debenhams was worth so much more per square foot than old houses that you could suffer the build cost and still make a profit. Of course now that shopping centre sits empty and there’s talk of squishing it to build houses.
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My strong suspicion though is that Cambridge resi land didn't become unviable in 2009, it just became unviable at 2008's land value. Or the landowner thought they'd make more cash by waiting.
Correct. The builder couldn’t pay the landowner what they wanted and still make a profit. It became unviable.
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Going back to the original point, I really don't think that example supports the argument that more house price growth would lead to more building in the UK.
It does. If house prices had continued to rise the developer would have cracked on and built those houses in 2008, not 2013.
Big builders have massive land banks they already own and build at a rate they know the market will deliver sales. Persimmon apparently own tens of thousands of sites. If they see everything selling fast and prices rising they rush to build as much as they can to make moar profit. If sales slow they slow down build rate.
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It’d need the loopholes carefully closing for sure. The current ‘must have begun’ isn’t sufficient, as you say, builders just dig a hole and the planning is active forever.
They love a loophole. On a big Barratt development near me one of the conditions was they had to have built a second access road by the time half the estate was built to ensure car traffic flowed. They built it, but never opened it so they could use it to store materials and for plant access. The council challenged it but the wording said ‘built’ and it was built, so Barratt were in the clear. In rush hour residents could queue for 45 minutes to get out of the end of their road. Lol.
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Another fun one is when a developer dodges the 40% affordable housing that is required round here by providing figures that prove that, with the finished flats being worth just £300k each, the development isn’t profitable with 40% affordable, so the council drop the requirement to 15% to help ensure the site gets built. Better 15% than nothing, right? Flats get built and, oh what luck, they’re selling for £400k! Who’d have thinked it?
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Living in green belt I happily object to all big planning applications. We've a site near us of 500k studio and 1 bed flats and 7x 1.5m 5 bed houses. The entire site should be affordable 3 bed houses.
All planning should feed back to the required housing stock which councils should all have identified and included in their local plan.
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All planning should feed back to the required housing stock which councils should all have identified and included in their local plan.
In theory that’s precisely what should happen.
The entire site should be affordable 3 bed houses.
Lots of planners think this is a mistake, even if that’s the need as it creates mono-cultures. A nice mix is thought to create a better community.
We've a site near us of 500k studio and 1 bed flats and 7x 1.5m 5 bed
This is not a nice mix. If the local plan were written as such the planners could have insisted on fewer flats and mansions and more stuff in between.
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My local council is Tory if that helps?
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@skydancer
I’m not sure I understand. You don’t think supply and demand affects house prices? So why do they go up and down?