Property News: Planning for disaster?

The first days of spring seem to have come and gone, but we are now looking forward to what are traditionally the three best months for residential sales. However, while prices are on the up locally, the government’s attempts to stimulate the construction industry may not be enough to dampen demand and risk blighting our neighbourhoods.

As previously reported, the property market in West Hampstead has started buoyantly this year. With buyer numbers up and slightly more property coming to the market, we have shown a 50% year-on-year increase in the number of sales agreed for January and February. I know other local agents are reporting similar stories.

The latest data from property analyst Hometrack indicates that national house prices rose by 0.1% in February. This is the first time since May 2012 that rises have been reported for nine consecutive months. The report also indicates that the north/south divide is growing further: Fewer than 1 in 7 postcodes across all of England and Wales reported an increase, but when you look just at London, that jumps to almost 1 in 2 (meaning they account for three-quarters of those national rises). This indicates that although there are some signs of recovery for the national market, London is still powering ahead.

The reasons for this demand have been well documented by the press and in this column. The government is hoping to capitalise on this demand and get the economy growing by stimulating the private construction industry (worth 6% of GDP and almost £100 billion), which is forecast to decline by 2% in 2013 following a 6.3% drop in 2012. This fall is largely due to a 14% reduction in government spending on infrastructure and construction projects.

The biggest concern is that only 118,000 new homes are expected to be built in 2013. I realise it may seem as if the majority of these are coming to sites around West End Lane; the reality is that this total is predicted to be only half the actual demand. The government has identified planning red tape as the issue and is temporarily relaxing planning laws in an attempt to generate more building. However, the Local Government Association, which represents local councils, says that there are currently 400,000 sites across the UK that have planning permission to build and that roughly half of all applications are eventually granted.

Of course, what it really comes down to is money – profit and availability. Developers are only interested in sites that return a profit, while more often than not local councils’ insistence on provision of affordable housing (or payments under section 106 agreements) in new developments often make these sites unprofitable. Meanwhile, former industrial or landfill sites require expensive cleaning operations and are normally in lower cost and less desirable areas. Developers want prime sites on which to build prime properties. It’s no wonder that house builders are sitting on large land banks in greenbelt areas just waiting for the value to shoot up when permission is granted. In addition, the financial crisis has led to less available funding for building, more financial penalties for missed repayments, and banks requiring more collateral. 

At a micro level, the government is trying to kick-start the construction industry by enticing us to build more extensions and conservatories through this three-year period of relaxed local planning laws. Now, you no longer need planning permission to build loft conversions or single rear extensions that are less than 6m or 8m from the back of your house (whether a semi or detached). Again, this assumes that funds are readily available to complete these building projects. Neighbours still have the right to complain and halt construction and any flat still requires planning permission for any building. I fear this policy will lead us towards half-finished, half-baked and ill conceived designs that will be refused retrospective consent when this temporary period finishes.

There is clearly a significant social and economic issue regarding available housing and accommodation in London and the UK, but planning procedures and consultations exist to protect individual homeowners from ‘blot on the landscape’ developments and over ambitious neighbours. Relaxing these laws is unlikely to lead to economic stimulus or benefit local neighbourhoods. Perhaps, in true Keynesian fashion, the government could consider increasing its spending on larger-scale house building projects to give the industry and economy the kick-start it needs?

In the meantime, a lack of available property and new-build investment, together with an insatiable demand continue to drive house prices upwards in South and West Hampstead.

Do let me know what you think? Are you planning to take advantage of the looser regulations on extending properties? Are you happy to watch your house price rise through undersupply in the market more generally?

Darryl Jenkins
Associate Director
Benham & Reeves
West Hampstead
020 7644 9300
Follow @BenhamReeves

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  • Good article, but hard to answer or comment as it asks many local and national questions. At the end of the day, individuals here will be concerned about the situation at a macro level so the national debate is a bit irrelevant to most of us. As for the local issue – so long as prices here are at least in line with or above national levels then most of us should feel "safe(ish)".

  • If you are planning for the residential sales, house extension, home extension and much more than it is better to write a planning application. Planning consultations exist to protect the individual homeowner’s development and over ambitious neighbors. The government also realizes that some project of housing definitely saves the economy so proper guidance is necessary. For more details you can visit here-http://speerdade.co.uk/blog/planning-permission-for-larger-house-extensions/