Regenerate Leaders: anticipating the housing recovery

When the market will recover

Savills have predicted that housing values will return to their pre-slump levels by 2012 in London and the south east driven by greater availability of mortgages from about 2010. When do you think prices will recover in your area? Any thoughts on the effects this would have on your organisation and on local people?

Anu Vedi, chief executive, Genesis Housing Group: There is no doubt in London and within the M25 area that in the medium term demand will continue to exceed supply. On that basis at some point the market will inevitably stabilise and start to recover. In my view, that is likely to be at least 18 months from now. However, the big caveat is liquidity, meaning the availablity of mortgage funding. This is a difficult call at present.

Stephen Teagle, managing director affordable housing and regeneration, Galliford Try: The time scales are not unrealistic. Price recovery will be very regionalised, reflecting the variable affordability. I would expect the willingness of vendors to release land to follow the same pattern. In terms of the first time buyer activity which pump primes the whole market, the improved availability of mortgages will need to be met with greater economic certainty and consumer confidence.

John Anderson, chairman, Berkeley Homes Urban Developments: I think that we will be experiencing pressure on sales values at Woolwich Arsenal for at least the next 12 months with any real recovery starting in mid 2010. The reduction in prices has obviously been as a result of a massive reduction in demand. We are hoping that demand will pick up as a result of the opening of the DLR in January 2009 and then when work starts on Crossrail in 2010.

Getting in ahead of the upswing

The report says there is likely to be a shortage of housing as the market recovers, caused by the time lags in getting development going again post-recovery, so those who are brave enough to anticipate the upturn and build then could make substantial amounts of money. Is that something your organisation would do? They also say demand for intermediate housing will probably be stronger than ever. Do you agree? Are you planning any changes in your intermediate housing in response to the market?

Anu Vedi: The present uncertainties of the market combined with the low levels of grant and rent regulation do not encourage RSLs to take risks in respect of cross subsidising rented homes by sales. A fundamental change in policy as promulgated by the G15 (group of large developing housing associations) is required.

Stephen Teagle: We have kept our debt levels low with cash generation a key element of our business model. That will put us in a strong position as the market turns to deliver into a rising market. The Intermediate market remains an important source of more affordable products and we will work with local authority and RSL partners and through our own shared equity vehicle, Galliford Try Affordable Homes, to offer affordable solutions. This is a specialist market and we have established a clear strategy to work with funders and government agencies to broaden our product range.

John Anderson: It is true that there will be a reduction in new build housing however this corresponds with the reduction in demand. I do not think that we will see a substantial increase in value for the foreseeable future. We anticipate a steady increase in values from 2010. We have a policy of delivering mixed tenure sustainable communities and do not think that we should change the proportion of affordable housing as a quick fix.

The future for section 106

Savills said section 106 requirements may have to be lowered in order to bolster housebuilding levels in the current climate. Since 106 homes make up a large portion of affordable housing, do you think a relaxation of 106 requirements would have a knock-on effect to levels of affordable housing?

Anu Vedi: Difficult to say.

Stephen Teagle: With the requirements for infrastructure contributions, low carbon homes and ever higher quality and space standards, the level of affordable housing within section 106 requirements is already under pressure. Economically viable levels have already reduced significantly and the application of toolkit assessments merely confirms this. Maintaining the levels of affordable production will inevitably require higher levels of grant funding or increased subsidy from RSLs. The levels of cross subsidy form speculative and shared ownership sales are only viable in a strong market. It’s now time for the public sector to take a lead in driving production rather than relying on market-driven developer activity.

John Anderson: Yes. In the foreseeable future private housing will no longer be able to provide all of the aspirations of the various stakeholders. There are very few schemes that will be financially viable enough to subsidise the affordable housing requirement without a substantial Housing Corporation grant.