Redrow to make move into London housing market

Redrow is planning to open its first office in central London to take advantage of the capital’s relatively buoyant housing market.

The move is a further element in founder Steve Morgan’s turnaround plan for the business, which he seized control of after a boardroom coup in March 2009.

The Flintshire-based company is to open an office in Holborn, initially be staffed by six people, and aims to buy three or four sites by next summer. The business will be led by Charles Calverley, a former Berkeley Homes director, who joined last month; Richard Reynolds, a non-executive director at housing association Orbit, will be part-time chairman.

John Tutte, group managing director of Redrow, said: “London is the biggest housing market in the UK by far and an area where Redrow is underweight.”

He added that an advantage of working in London was that “there is less debate over the principles” of planning than in other parts of the country.

Redrow has built three schemes in the capital but has never set up an office. The last project was Odyssey on the Isle of Dogs, completed six years ago; more recently its regeneration arm was involved in the Barking Central mixed-use scheme.

Calverley said Redrow would look for sites with a minimum of 20 plots but there was no upper limit. He said: “It will be opportunity driven. We won’t necessarily avoid central London regeneration projects.”

The company, which released its 2010 results last week (see box), is understood to be concentrating on the more affluent suburbs, and Tutte said the flats would be aimed at the “mid and upper-mid” segment of the market. They will sell for between £400 and 800/ft2, meaning a one-bedroom property will start at just over £200,000.

In February, the company launched its New Heritage range of family housing as part of Morgan’s plan to re-focus on traditional family housing.

Morgan was critical of the previous management team’s Debut range of compact flats, which he said were too small. The London flats will have bespoke designs, averting the need to develop a new range.

Tutte said that although London had traditionally been a crowded market, the difficulty smaller firms face in raising finance meant it was a good time for bigger players to move in.

Kevin Cammack, an analyst at Cenkos Securities, said: “London may prove to be a quicker fix than penetrating the South-east more generally. The capital is a riskier market, which requires more working capital, but you need fewer sites to raise profitability.”
The London housing market has fared better than the rest of the country because of a shortage of supply and the influx of overseas cash.

Tutte said: “A lot of the property assets under the banks’ control that will be unwound over the next few years are in London.”