Investors who have been holding off investing in house builders until the government’s housing policy is clearer might have to wait a bit longer.
Deutsche Bank thinks that the White Paper on Housing, originally expected late last year and rescheduled for this month, may now be delayed until next month.
The German bank thinks the government is pushing the Department for Communities and Local Government (DCLG) to be a bit more adventurous in terms of releasing green belt land for residential development.
Deutsche believes the government is also seeking to push the targeted number of planning permissions higher.
Both changes of policy, if pushed through, should be helpful to the big operators that build shed-loads of houses, and especially those with strategic land portfolios.
“One of the govt’s key issues is that while planning permissions are up 60%+ to 289K pa (vs 200,000 targeted new homes), the number of active outlets has remained flat over the past five years (i.e. planning permission have been granted on larger sites),” the Deutsche team said.
In general, the bank expects the White Paper will largely be focused on planning, and should be generally supportive to house-builders, though there may be some negative implications.
On the positive side, there could also be scope for policy to allow ‘presumption in favour of residential development’ on brown-field land in urban areas, which would perhaps allow builders to identify new residential sites on brown-field land rather than the onus being on local authorities.
“Starter homes, we believe, will be included in the White Paper; however, it is now thought this may not be a simple replacement of affordable [housing], but many aspects of this policy are yet to be detailed,” Deutsche Bank (DB) opined.
DB is predicting that the Committee Infrastructure Levy will be replaced by an alternative tariff.
The net effect is likely to be largely neutral, in DB’s view.
While it would be unwise to rule out a charge on land that has planning permission but which is not being developed, a study by the leading industry federation (HBF) last year indicated this type of land was only 4% of land held, and is even lower for the high profile volume house builders.
“While we understand there has been talk of potentially required build rates stipulated in planning, industry seems to view this as impractical on all but public sector land (and would likely require commitment to purchase built yet unsold homes, with any related discounts likely to be reflected in land value).
“The Housing Minister has already talked a lot about modern methods of construction (such as timber or steel, frame, pre-fab, larger size blocks etc.), and tax credits to encourage this are possible; however, the benefit of these may be to the product manufacturers rather than the home builder, Deutsche concluded.