Thursday 6 September 2012

UK House Building - A new start?

Work has started on Bill Quango MP's extention already
As the BBC points out there are 400,000 thousand applications for extensions and new home is the UK which are not being done. Many people know the trick of applying for planning, getting it and then selling on a property with the 'added-value' now embedded and so asking for a better price.

Less have been successful in getting that new price in the last few years with a deep recession and restricted mortgage availability - so how much of this 400,000 is in effect pure vapourware? Its quite a lot no doubt.

But, with construction lagging in the economy (although with very dodgy ONS data can we even really be sure this is true), the cry of something must be done has been raised in the media. National infrastructure projects like new airports, powerstations and roads are voter unfriendly and must be left to the next Government. The Coalition already has HS2 and that is enough bad news for home counties constituencies to take.

From a trading perspective I am not so sure this is good news for housebuilders as it maybe mean although they get more planning, people do extensions and so don't move. Instead, Kingfisher and other DIY businesses will move on this news to a greater extent.

So now, along with an improved national planning framework, we are to have a free-for-all on extensions to boost the economy. As ideas go this is not too bad. We have a bug shortage of housing stock and over-priced properties, so investment in this area should generate real returns, whilst potentially helping to balance serious crisis.

Now, if only they can find the strength to allow some private sector build some gas fired powerplants and an airport the Government might even help pull the Country from recession....


roym said...

'strength to allow some private sector build .... and an airport '

I'm not sure there is a long queue of genuine private sector entities willing to do this. after all most will want subsidies in one way or another. In addition, is there any genuine research on airport capacity in the south east. i have not seen anyone make a convincing business case beyond the usual vagaries such as falling behind etc

Nick Drew said...

I am with roym on airport capacity

not my specialist subject but I found it deeply counter-intuitive that demand for air traffic is set to rise and rise

every week I go through Dublin airport, expensively expanded based on the Celtic Tiger thing, and now echoing to the sound of a handful of passengers as the tumbleweed bimbles around the vast empty spaces

I do know, however, that the engineering trade is fairly hooked on massive public projects, for which there will always be much clamour

(CT, Jubilee Line, Thames Ring Main, T5, Olympics, ...)

who knows, some of them may one day actually show a return?

Blue Eyes said...

Spain built dozens of new airports on the principle of "build it and they will come". Many are now bust and/or mothballed.

HOWEVER Britain has had the opposite problem for decades. We didn't have the big housebuilding and infrastructure boom that we paid for in Southern Europe.

I agree that there probably isn't a business case for a brand new London airport unless Heathrow is closed down. How much is *that* going to cost the taxpayer?? Who is going to pay for the fast transport links to a new airport much further away from Central London??

But I don't think we should dismiss all infrastructure projects as special pleading.

The Tube, for example, is always about ten to thirty years behind on capacity. There is huge scope for getting economic returns on transport infrastructure in London because there is a coincident housing shortage that could be solved easily if improved infrastructure allowed higher building densities. See Docklands and places like Deptford for example.

Transport improvements in London could be at least partly paid for by planning gain or land taxes. See the mooted Northern Line extension to Battersea for details.

I think Britain's decision-makers have to be a bit more subtle than "yes to infrastructure projects to boost GDP" or "no, because we like our tranquil suburbs".

CityUnslicker said...

T5 - hmm, ND that rather helps the old airport case though, the thing has been at full capacity since it opened.

BE - of course you would close heathrow to build a new airport - which may not be ideal. But I tend to agree we need some new capacity - unless ND you are suddenly convinced by the Peak Oil brigade in which case perhaps some Zepplin docking or something instead.

Finally, I look at all the vicotrian infrastructure. Over the real, multi-lifetime, scale some of this building is realy good value. I recall living in a very nice house that was built in 1783 -I doubt that lenght of use had been put into the original ROI...

James Higham said...

The whole notion of planning permission is ridiculous beyond obvious height limits, easements etc. Just why someone in a council somewhere should decide what you have on your property is bizarre.

andrew said...

Gear govt, when are you going to build the severn barrage (aka my local boating lake)

- 5-10% of UK electric energy needs
- sort of green if you squint
- no glowing in the dark
- no nasty smokestacks

btw if you try to build it within sight of my house I will of course object to the planning process.

Sebastian Weetabix said...

I'm presently wandering about Asia on a sales trip. As always I'm impressed by the modernity, efficiency, capacity, ease-of-use and sheer niceness of the airports, trains and so forth in Japan, S. Korea and China. I contrast & compare with the sheer shitty nastiness of a Heathrow that is bursting at the seams (not even enough seats, FFS! Never mind enough runways) and our pisspoor railways and I am embarrassed at our 3rd world infrastructure. For once the cry of "something must be done" is not wrong. Wake up, people of Britain! You have nothing to lose but your queues and your reputation for slothful incompetence! Foreigners really do judge us on our airports and railways. They don't like what they see. They assume our output of goods is of a similar (lack of) quality.

Our roads are shit, even our drains are not just full of shit, they are shit. And you dozy buggers are drivelling about ROI. Jesus H. Christ. Get with the public works programme. We don't need to bail out banks, we need to sort out our infrastructure.

Bill Quango MP said...

I find myself in agreement with every comment.

That can't be right? It can't even make sense.
Yet somehow...

rwendland said...

andrew, if you want a severn barrage you need to explain how the terrible economics can handled. The 2011 Mott MacDonald report estimates barrage leccy would cost about 48p/kwh, compared to around 8p/kwh for onshore wind, and the latest EDF leaks of around 14p/kwh for new nuclear.

Basically the severn barrage has all the financing probs of new nuclear, gone large. Vast capital costs, very long lead times before power is generated, high risk of overruns, new overhead power lines ...

The only credible-sounding financing idea I've seen for the severn barage, is to allow the developers to build a new large town at either end, and making sure the developers get the full land price gain from farming to fully-developed land to sudsidise barrage costs. A very interesting idea, but I've not seen any numbers for this to see if it is credible. And would two large new towns near Bridgwater and Barry be needed?

Nick Drew said...

I find myself in agreement with every comment

we expect nothing less from our politicians Mr Q

Electro-Kevin said...

I fail to see how we can 'build our way to prosperity.'

The only way to do that is to waste less and add value to goods and services and export them in order to bring down the deficit and to pay off our debts.

A big problem for many is not going to be planning permission but access to loans.

It may get those with savings releasing their money into the economy - but surely the banks need those savings ?

Electro-Kevin said...

With respect to Sebastian Weetabix a lot of the people I know who can set up railways fuck off to Asia and Australia to do it.

With respect to Blue on his comment about us not having a housebuilding boom - we were caught out by an unexpected and disasterous influx of 4000,000 extra people of doubtful usefullness and the loss of very many skilled people.

There would not have been a housing shortage had this not happened.

Electro-Kevin said...

I fail to see how we can 'build our way to prosperity.'

Meaning houses of course.

Certain infrastructure projects would help us but the success of industry in Asia begat their booming infrastructure - not the other way around.

We would need yet further borrowing to do it.

Face it. We're going down the toilet and shit railways and airports are what you get in nations in decline.

What else did you expect it to look like ?

Budgie said...

Government and business are determined to build on green fields because it is cheaper than re-developing brown field sites. Our last green field in our neck of the woods is now being built on, yet there are many dilapidated, or even derelict, brown field sites within a two mile radius.

On the separate subject of Wind power, despite rwendland's persistently quoting the cost only of the windmills, backup is required which roughly doubles the cost. Wind with its necessary backup (Gas, Storage, etc) is the most expensive electricity generation method currently being built, and far more costly than Nuclear, Clean Coal or Gas.

Bill Quango MP said...

I find myself in agreement with every comment

we expect nothing less from our politicians Mr Q

I fear I am suffering from the Lib Dem influence. I think I need to go and have a lie down. Or at the very least find a nice fence to sit on.

Sebastian Weetabix said...

@Electro-Kevin, re booming business leading to good infrastructure: wrong, wrong and thrice wrong. The Chinese government (starting with special economic zones in the late 80s early 90s) put ports, roads, railways, power stations, telecomms and airports in place to enable their mfg boom. It cannot be done the other way round. Of course it is also easier to do if you have no planning laws, imprison dissidents and can command the 3 million members of the PLA to just get on with it.

Why is manufacturing not moving to India? It's cheap, they speak English, they have UK style contract law etc... It isn't just because of corruption, there's plenty of that in - ahem - booming eastern economies (you never know who's listening which is tricky if you have businesses in these places), it's because their infrastructure is quite astonishingly piss-poor- you just can't get raw materials and finished goods where you want them, when you want them, and the lights keep going out. Soon to be our fate, that.

By the way: Korail? Hyundai. Japan railways? Mitsubishi & Hitachi, inter alia. China? Siemens plus local rip off of Siemens. Not much British expertise on show, I fear. Considering we invented the bloody things it's probably a good symbol of our relative decline as an engineering nation. It's all those Oxbridge PPE twats in charge that does it.

Sen. C.R.O'Blene said...

Don't give it to the banks, they are pathetic.

Give it to the housebuilders and the developers, to get white van man up and away, and the architects, and the engineers, and the quantity surveyors, (and yes - the estate agents) and the developers, and the subbies, and the painters, and the builders merchants, and the concrete suppliers, and the steel erectors, and the timber importers, and the local chaps with small businesses etc etc...!

Why give it to RBS and all their mates for their bloody share price! Stupid idea!

This is a crazy argument, and adjusted daily by our stupid, uncommercial, self-serving politicians.

Take it from me, if we don't get funding for our £80m worth of costed and institutionally recognised schemes, then all the above will probably go to the wall.

Take it or leave it Cameron, you are so ridiculous in your aspirations.

Just do something more than piddle about with conservatories and sheds.

Electro-Kevin said...

Sebastian Weetabix

China's boom began its upward trajectory in 1992 and has kept it since. In fact this graph shows it began on a shallower trajectory some years before that.

So it must have had swish infrastructure and state of the art factories, airports and ports 20 years ago by your reckonning - otherwise her economy couldn't have begun its boom.

Electro-Kevin said...

My point here is that what they put in was probably 'good enough'

The main driver of their economy was that their work force was dirt cheap and willing.

Your previous comments mentioned the niceness of trains, modernity, capacity and ease-of-use of airports.


Those lovely things came AFTER the boom started.

Sebastian Weetabix said...


We have a factory in Yantai. It was one of the first special economic zones in China, designated in the mid-80s. Why did we go there in the mid 90s? Because it had a good port, good railways, good roads and good telecoms. Put in by the govt in anticipation of attracting business. It worked. They did the same in Shenzhen and repeated the trick all over China. You simply do not and cannot put a factory in a shithole, especially if you are a foreign investor, no matter how cheap the locals, because you need to get stuff in and out.

That's why there are ghost towns and roads to nowhere throughout inner Mongolia. They built it, but so far nobody came. They've just been doing the same thing in Chengdu and Chongquing to bring in computer production. Roads, rail, power etc first - then subsidies to attract Taiwanese ODMs into town. That's how it works. I'm afraid you are simply wrong about this - your reasoning is putting the cart before the horse. To sustain their boom (which is going tin the opposite direction right now) they have to keep this going. Is this built on past prosperity? Yes. Did the infrastructure come after the start of the boom? No.

Electro-Kevin said...

Let's revisit some earlier comments on this page, Sebastian.

At 1.11 pm we were waxing lyrical about the modernity and ease of use of infrastructure in Asia and lamenting the state of our 3rd world infrastructure.

At 6.48 I agreed with you that certain infrastructure improvements would help us ...

but not the flashy infrastructure that you mentioned at 1.11

In fact our shit airports and passenger trains give fair warning to any visitor to just what an indolent and unpleasant people we have become - that much of England is very well represented by what you see in its airport arrivals lounges.

We have had - and still have - all the connectedness and infrastructure we need to begin rebuild an economic boom but it just isn't happening.

By your measure Spain, Ireland, Italy should be leading the world but they aren't.

There is something else. The main reason why you went to China.

Ah yes.

A skilled work force prepared to get out of bed for £12 per day.

Sebastian Weetabix said...

There is no welfare state in China at all. They literally have to work. Being willing is neither here nor there!

CityUnslicker said...

Nice comments all most enjoyable.

China will come a cropper thogh SB, much of their money for development is also funny money. One advantage they have is they spent it on real stuff - ours went on welfare and now exists around many people's waists.

There is a balance to be had somewhere, neither China nor the UK have it right, neither does India. Japan has also spent all its QE on ifrastrucure and not much good it has don them.

the UK though desperately needs to keep up. Oh, and I agree re trains, really sad we could not keep that up as an indsutry we invented. then again, amercians make shit cars too...

Jan said...

All very interesting comments. With regard to our trains which are ancient compared with those of other countries and not that clean or comfortable, I have for ages (probably about 30 years) wondered why there are so many nearly empty 1st class carriages when most of the rest of the train is stuffed to bursting? Often people are standing for long journeys but if you sit in a first class seat with a second class ticket you will be stung.

I don't understand how it seems to take 30 years plus to replace carriages or why at relatively low cost it would be easy to refurbish some of the 1st class carriages and make them into 2nd class.

Electro-Kevin said...

Jan - the reason for having those carriages is in the difference between first class and standard class ticket prices.

I suspect that when standard gets so bad more people opt for the upgrade. They don't have to be filled to make a disproportionate amount of money to the rest of the train.

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