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‘Digital transformation will encourage MMCs’ and speed-up developments

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  • 23/11/2017
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‘Digital transformation will encourage MMCs’ and speed-up developments
The development finance industry is hopeful that the Budget will bring the chance extend its wings and work on new land and projects.

“Put simply, successive governments over decades, have failed to build enough homes to deliver the home owning dream that this country has always been proud of,” chancellor Philip Hammond said.

 

Land Banking

To address this failure in homebuilding, a number of measures were announced, including an “urgent” land banking review to examine the “significant gap” between the number of planning permissions granted and the number of homes built.

Jonathan Sealey, chief executive officer of Hope Capital, thinks the review – to be chaired by Sir Oliver Letwin – could deliver the desperately needed land supply. “While land banking is only just at investigation stage, it may result in developers bringing forward house building developments,” he said.

Sealey continued: “Increased house building would of course increase supply which, if increased in high enough numbers would have a dampening effect on house price rises which would be of benefit to first-time buyers.”

“The other consequence of the land banking could be a flood of land coming onto the market before next April, from developers who had not intended to build on it and are worried about an immediate financial penalty being brought in in the Spring statement. This would at least free up the land for those who really do want to build on it which has to be a positive,” commented Sealey.

However, he also noted that given the current shortage in qualified construction workers – an issue that Hammond will try tackle with a £34m fund – even if more land is freed, it is “hard to see how this will happen in the short term, in the volumes the government wants.”

 

Productivity

Despite low levels of unemployment, Britain’s productivity (as measured in economic output per worker and per hour) has remained at roughly the same levels as in 2008.

However, Alan Howard, design and manufacturing lead at the Institution of Engineering and Technology (IET) thinks the commitment to digital transformation will go a long way in meeting production needs, such as by adopting modern methods of construction (MMC).

“Housebuilding really hasn’t updated its techniques so new technology has the potential to allow housing to cost less to build, in less time, with an overall safer and healthier end product,” he said.

“Digital transformation of the construction industry will encourage the use of off-site methods which will massively increase the productivity of the sector,” Howard continued, “this would allow any investment made by government and any land freed up for housing, to be used more effectively.”

 

Funding

In addition to the more policy based measures, Hammond also pledged an additional £15.3bn of new financial support to address the housing shortage – taking the total amount of capital funding, loans and guarantees committed to at least £44bn.

Although these funding announcements are “definitely a step in the right direction”, more operational details and time are needed before a firm judgement can be issued, said James Bloom, managing director of short term lending at Masthaven.

“The headlines are certainly interesting, especially new money for the Home Builders Fund – the chancellor announced some impressive numbers here, but as always, the devil is in the detail. For example, I think allocation of funding for SME developers needs clarification,” he said.

“The government has been trying to fix the under supply of new homes for many years, but so far none of the measures have worked sufficiently,” Bloom continued, “whether [these] new measures will alleviate the structural issues remains to be seen.”

“This will become clearer over the coming weeks and months,” he added.

However, Rico Wojtulewicz, senior policy adviser for the Housing Builders Association (HBA), believes if the announcements are implemented fully, the Budget’s ambition to increase housebuilding can “deliver immediate results”.

“Big announcements on housing have come and gone, as have their promises,” said Wojtulewicz, “however, this budget tackles some of the nuanced conversations that the industry has been having with the Government over the last couple of years.”

He continued: “The register of planning permissions, increased allocation of small sites, consultations dealing with the reality of delivering homes, and lifting the housing borrowing cap are the headlines we are focussing on.”

“Just like the Housing White Paper, we see this as another example of the Government taking on board the opinion of those who actually build the homes we so desperately need,” Wojtulewicz added.

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