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AMI takes swipe at house builders for throttling new build sales

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  • 23/07/2018
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AMI takes swipe at house builders for throttling new build sales
The Association of Mortgage Intermediaries (AMI) has accused house builders of deliberately restricting the sale of new build homes to control pricing and values.

 

In its quarterly economic bulletin, the trade body said it had seen figures suggesting developers sold on average, 1.2 homes per site per week.

It cited figures from Sir Oliver Letwin’s interim report on build-out rates, which identified a 40% lapse in planning permissions and noted in London 270,000 residential planning permissions remain un-built.

However, Sir Letwin said he had found no evidence of developers land-banking, and developers have argued this is to maintain a commercially viable model.

 

Stranglehold

But AMI believes large builders are controlling the build-out rate of new homes.

It continued: “It also seems fair to insinuate that restricting the supply of new homes keeps a floor under pricing, which is of benefit to development companies.

“It has been brought to our attention that this slow sales rate is directly related to a conscious decision to control supply and therefore price.

AMI added: “If this is not landbanking, then perhaps the definition requires a rethink. Builders are controlling supply to control pricing and values.

“If the argument that building more homes is the best way to ease the UK’s affordability crisis, then the developers’ stranglehold on the market must be broken.”

A spokesman for the Home Builders Federation said: “The comments show a lack of understanding of the development process.

“Housing supply is up 74% in the past four years as builders have accelerated both build out rates and investment in future sites.

“New homes account for a small fraction of housing transactions making house builders price takers rather than price makers.”

 

Reverse BTL tax changes

AMI also highlighted concerns with the private rental sector and buy-to-let market and asked whether it should lobby government to abort or delay the continued tax changes for landlords.

It cited a fall in buy-to-let purchases, according to UK Finance data, and the largest reduction since 1988 in the number of privately rented homes in England, according to the Ministry of Housing.

This means landlords are offloading 3,800 buy-to-let properties a month leading to the first drop in the number of homes available to rent in 18 years, it said.

“If one of the Financial Policy Committee objectives is to maintain a stable housing market, and indeed, this is what its stated aim in introducing tougher affordability stress testing and portfolio assessment rules was in 2017, then do these numbers not threaten that outcome?” AMI asked.

“While careful and robust affordability assessments are to be welcomed, particularly in light of the tax changes over the next three years, flooding the housing market with properties for sale and at the same time putting pressure on the availability of private rental stock, surely does not achieve stability?”

The trade body added: “AMI would question whether there is a responsibility to raise this with government and suggest a full or partial reversal – or at least a delay – to the Section 28 tax changes that appear to be driving this behaviour.”

 

 

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