Harris Lamb Blog – 25th Feb



Andy Lamb

25th February, 2011.

The Credit Crunch Continues?
…The implications for new build homes.

By Andrew Lamb, Director.

Our own Andy Lamb talks about the reasons for the current paralysis in the housing market and the potential impact this is having on developers. 

The route provides 27 miles of privately funded and operated highway from Coleshill in North Warwickshire to Cannock in South Staffordshire.  The road carried an average 47,592 vehicles on weekdays in the summer of 2010  and from my experience of the Toll Road, private cars form the vast majority of the traffic.
The M6 Toll Road was identified as an “M6 Relief Road” to alleviate congestion on the M6, which is something many people feel has not been adequately addressed and, with one way car tolls at peak periods of £5, this is something to be debated elsewhere.
From a property perspective the benefits have probably been more tangible than the traffic improvements.  The southern end of the Toll Road and the ‘T1’ junction close to J4 M6 coincided with some of the latter stage build projects at the Hams Hall National Distribution Park, a 430 acre business park which ranks as one of the best such employment parks in the UK.
Junctions T2 and T3 appear to largely function as commuter gateways for those living to the south and east of Sutton Coldfield from where national motorway access has improved considerably and the effect on house prices has been positive in these areas.
The access to Junctions T4 and T5 at Weeford and Lichfield has given a stimulus to residential and commercial property markets alike with possibly the biggest winner being the 300 acre Fradley Park, where some of the largest distribution buildings in the area have been built with more to come.  We are marketing the new Fradley Prologis Scheme with 70 acres and units to 700,000 sq ft available to be built and which will be on site shortly.
T6 Burntwood, a forgotten part of the West Midlands conurbation 10 years ago for business and for new build residential perhaps, has not quite been “transformed” but certainly “considerably improved”.
T7 & T8 and the Cannock access points to the Toll Road provided the catalyst that has helped to promote the former coal mining town into a first rate employment location.  Significant development of a cross section of employment type accommodation from offices to manufacturing and warehouse operations has bought vitality to Cannock which I think is largely due to the Toll Road passing the town’s doorstep.
For those drivers who still regularly sit stationary on the M6 between junction 8 and 10 bemoaning the state of the traffic and whether the Toll Road has done the job it promised, the tangible benefits are probably in property as much as traffic counts.  The commercial new build and viability of new schemes along the entire length of the Toll Road has been transformed since the road was built.
For the positive effects of the Toll Road you may look little further than the development and opportunity is has created alongside it.

Rightmove, which is the UK’s largest residential property portal, has said that most of the UK’s property housing market faces ‘paralysis’ this year.   The reasons put forward by Rightmove are that many sellers are refusing to drop their prices, they even point to the price of newly advertised properties rising by 3% in January to £230,000.

The main reasons for this ‘paralysis’ is however attributed to a lack of mortgage finance for potential new entrants to the world of house ownership plus equity erosion for existing house owners as house prices fall meaning people are unable to ‘move on’.  This is before we factor in uncertainty in peoples minds over job security and public sector cuts.

Whilst there may be an argument that house purchasers are now looking for bigger discounts from asking prices, the major factor has to be, as Rightmove say, the continuing ‘credit crunch’ and the terms available for mortgage lending being so much more exacting and strict.  Whether size of deposits on new houses required; the earnings multipliers being restrictive or the interest rates being charged it all adds up to a tough job in getting a mortgage.

The implications for new build residential schemes are not all gloom and doom though with many areas of the market still being extremely active. 
The latest national statistics on house building for the last quarter of 2010 showed seasonaly adjusted house building starts at 23,000 which is 54% below the March 2007 quarter peak but it is 40% above the trough in the March 2009 quarter.

The statistics showed an annualised number of starts to December 2010 of 103,140 up by 32% compared with the 12 months to December 2009.
It is important not to confuse the data on house sales with house building starts, as the data shows the number of houses being built is ‘on the up’.

The strength of the private rented sector has been endorsed by the news in the last few days that Barratt Development are considering a move into London’s rental market as it looks to ‘hedge against the impact of restricted mortgage availability’. If the UK’s largest housebuilder is looking to build and manage a large portfolio of residential property then the signs are clear that the house building industry will find ways to innovate and adapt to provide the new housing stock that the market demands.

Indeed, speaking recently to a developer of city centre schemes, they have shifted to now holding and letting out residential units as opposed to selling, and are reporting full occupancy and waiting lists for available accommodation to let. 

If you are looking for advice on bringing forward land for residential or mixed use then please contact one of the Development Consultancy Team at Harris Lamb.

Andy can be reached on 0121 455 9455 or via email: andrew.lamb@harrislamb.com.    

Disclaimer: The views expressed within this article or weblog (‘blog’) are the personal views of the contributo
rs and authors only and do not necessarily reflect the views of any named companies or thier employees.