The £60,000 home will never happen

I have just read an article about the £60,000 home which has prompted me to say a few words.

http://www.bbc.co.uk/news/business-14410589

Firstly, it must be remembered that the £60,000 figure was supposed to refer to the construction cost and not the actual sale price. A lot of people seem to forgot or not to have realised that.

The second point is that the idea of ‘removing the land from the equation’ is a false concept. If you have the right to occupy a home, and the right to pass in to to someone else (i.e. freehold or a lease which is transferrable) the market is what will determine what you can sell it for, and the fact that the land was free at the point at which the home was built is irrelevant.

In fact, as anyone who is involved in the development industry knows, it is the market price of a home, less its build cost and the developer’s costs and profit, which determines the price of the land.

The price of a home is determined by supply and demand, and that supply and demand is, in turn, determined by many things. For example, some people say that it is the planning system which restricts the supply as the developers cannot build where they like, when they like.

If we really want the price of homes to be more affordable for more people we need to build more homes – a lot more. Of cource, to do this, there needs to be sufficient money around to supply the mortgages and to finance the developments until the homes are sold by the developers.

But I think that we also need more developers. There are only a relatively few number of developers, and it is not in their interest to ‘flood the market’ with new homes, nor to take too many risks by building too many at any one place at the same time (and in any event, in most places it is the price of the existing homes which determine the price at which the new homes can be sold).

There is no simple answer to making the price of homes more affordable, and I do not intend to go through them all here, as I intended this to be a short blog inspired by the article by the BBC. But there is one thing which I think does need to be addressed which is not often mentioned: I think we need to have more developers – we need more , a lot more, small scale developers who can gain planning consent and put up good quality homes. However, at the moment, there are only a small number of developers who can afford the huge cost of gaining planning consent and of taking the risks involved. We need more developer-builders.

This blog isn’t intended to provide a one answer solution, and I have a lot more to say about what needs to be done, but I wanted to just say something about removing the price of land, and needing more developers, before I have to dash out for a meeting.

 

 

 

 

 system prices will still be

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