House builders likely to be buying more land in London in 2013
The house building land sector saw increased activity in 2012 in England, despite continued fragile economic conditions, new research from CBRE reveals. House builders committed more capital to land acquisition and development, attracted to good quality residential sites with planning consent.
The firm says that the land market has benefitted from many house builders achieving financial stability now seeking to replenish their land banks. House builders are competing over sites with strong potential for residential development, which are seen as a secure option for investment. However, conditions vary regionally and as a result house builders are concentrating their land acquisition search and development strategies in those markets with the best underlying economic fundamentals.
‘Government backed lending initiatives have helped restore confidence with house builders, for the moment. FirstBuy created 10,000 sales in 2012 and NewBuy produced 1,500 reservations,’ said Jennet Siebrits, head of residential research at CBRE. ‘Slow, yet encouraging growth in the mortgage lending market has supported a pick up in the land market. However, developers will be keeping a keen eye on lending conditions, as FirstBuy and NewBuy are due to close in 2014,’ she explained.
In terms of what is ahead for the land market in 2013, Siebrits believes that the key driver for house builders will be the Return on Capital Employed (ROCE). House builders desire short term projects where there is minimum time between deploying capital and seeing returns. This will be the deciding factor in the size of acquisitions and types of properties built, she said.
She predicts that the appetite for good quality residential housing sites will remain high and competition between purchasers will ensure good prices. Also, apartment schemes that cannot deliver the desired returns in the private rented sector will be re-planned for alternative use where possible. The Community Infrastructure Levy will continue to affect where investment is made and local authorities will need to carefully balance their needs for infrastructure funding for wider investment, so as not to deter developers.
Quote from PropertyCommunity.com : “Home owners in the UK, who failed to sell their property in 2012, need to consider new options if they want to be successful in 2013.”
Other predictions include a wider range of house builders increasing their development exposure in central London, particularly for schemes of up to 100 units near public transport. Demand for land with planning permission is likely to be high, giving land traders a good opportunity to profit. Outside of London in the South East, 2013 is likely to see a greater concentration of investment in commuter counties but little elsewhere.