Wednesday, March 02, 2016

Profits before houses

Britain’s largest building developers have been accused of profiteering on the back of the country’s housing crisis by restricting the supply of new houses to keep prices unnecessarily high. Figures reveal that a record half a million homes in England now have planning permission granted but have yet to be built. The length of time it takes for developers to complete a house has jumped from 24 to 32 weeks. While rates of planning permission for new homes have increased by 60 per cent since 2010 there has only been a 48 per cent increase in the number of new homes being built. The failure of developers to speed up house-building is fuelling fears that some are deliberately restricting supply of new houses to boost profits. Figures compiled by the Local Government Association show that there are now a record 475,647 homes in England which have been given planning permission but have yet to be built. In 2012-13, the total was 381,390. In comparison, the number of planning applications being approved had risen to 212,468 – up from 187,605 in 2007-08 – and is higher than all previous years.

Taylor Wimpey announced a record operating profit margin of more than 20 per cent yesterday as it sold more homes at higher prices. Pre-tax profits at Britain’s biggest housebuilder Barratt Homes have also jumped 40 per cent in the past six months to nearly £300m.

The housing minister, Brandon Lewis, said, “Housebuilders will talk about saturating the market. But we are aware that in too many places we are still taking 20 weeks to build a house when we can do it in three or four.”

Clive Betts, the Labour chairman of the Local Government Select Committee, said:  “I think it is clear that the big developers are building at a rate to maximise their profits rather than addressing the country’s housing need.”  Mr Betts added that some developments that have had planning permission were not due to be completed for another 10 years. “These are private companies who are very simply trying to make money for their shareholders. They are restricting supply and the Government urgently needs to come forward with measures to address this.”

Peter Box, the LGA’s housing spokesman, said the figures “conclusively proved” that the planning system was not a barrier to house building. “To tackle the new homes backlog and to get Britain building again, councils must have the power to force developers to build homes more quickly,” he said.

A spokesman for the campaign group Generation Rent added: “These are businesses out to maximise their profits so it makes sense for them to limit the supply of housing that is being built. But it shows that you cannot rely on them to fix the housing crisis.”

Shelter said one of the “major problems” with the industry was that it relied on “a small number of big developers to deliver the lion’s share of the homes we need”. Some of the smaller developers went bankrupt as a result of the financial crisis, the market is now dominated by a handful of big companies reluctant to increase output significantly.

UK’s biggest developers:

Taylor Wimpey
Market capitalisation: £6bn
Pre-tax profit: £604m
Profit margin: 20 per cent
Chief executive: Pete Redfern 
Salary (including long-term bonuses) £5.8m

Barratt Developments
Market capitalisation: £5.9bn
Pre-tax profit: £570m (estimated)
Profit margin: 18 per cent
Chief executive:  David Thomas
Salary (including long-term bonuses): £4.28m

Berkeley Group
Market capitalisation: 4.43bn
Pre-tax profit: £586m (estimate)
Profit margin: 25 per cent
Group executive chairman: Anthony Pidgley
Salary (including long-term bonuses): £3.38m

Bovis Homes
Market capitalisation: £1.29bn
Pre-tax profit: £160m 
Profit margin: 16.9 per cent
Chief executive:  David Ritchie
Salary (including long-term bonuses): £1.5m

Market capitalisation: £1.6bn
Pre-tax profit: £95m (estimate)
Profit margin: 17.2 per cent
Group chief executive:  John Tutte
Salary (including long-term bonuses): £1.09m

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