Kicking the can further?

[DazRave]

My better half runs a business that's involved in a lot of new build sites across the North West for multiple house builders.

In a nutshell, most have stopped building new houses completely and one of the larger house-building companies has/will be rising prices sharply. As expected, mortgage offers were expiring before houses could be completed and when the buyer resubmitted they found they couldn't afford it/were no longer approved.

I get that the house itself would have cost more to build due to materials etc but my first thought was that they were being greedy and trying to grab what they could while they could. However, upon second thought, are they actually trying to prevent sales in order to dry up the already-built stock?

If they are not building anymore and they are able to push up the prices of all the new builds, are they effectively helping to kick the can further down the road, keeping the bubble tightly sealed?

 

[tony84]

A lot of mortgage lenders offer 6 month mortgage offers with the ability to extend for between 3 and 6 months without the need for further underwriting on new builds.

But yes, one of the issues I have with new builds is that we always end up having to get extensions so its like 1 and 1/2 jobs for 1x pay. Not the customers fault, but something I try to keep an eye on as it does affect how many other cases we can take on.

I was not aware house builders are stopping building houses, this does not make much sense. They have staff on wages, they still need to sell properties in order to pay wages. I assume it is only affecting new developments rather than developments already started?

 

[Mark T Jones]

I don't know the answer, but I can pretty much guarantee that the decision revolves around this accounting year rather than a longer term vision.

 

[IanSuth]

A lot of mortgage lenders offer 6 month mortgage offers with the ability to extend for between 3 and 6 months without the need for further underwriting on new builds.

But yes, one of the issues I have with new builds is that we always end up having to get extensions so its like 1 and 1/2 jobs for 1x pay. Not the customers fault, but something I try to keep an eye on as it does affect how many other cases we can take on.

I was not aware house builders are stopping building houses, this does not make much sense. They have staff on wages, they still need to sell properties in order to pay wages. I assume it is only affecting new developments rather than developments already started?

A lot of the big boys have subbies doing things like 2nd fix. If they aren't building they arent paying those who are on day rates.

 

[DazRave]

A lot of the big boys have subbies doing things like 2nd fix. If they aren't building they arent paying those who are on day rates.

This is correct. They have basically got rid of the subbies who are right at the start of the builds. There's less digging and more second fixing in order to finish already started jobs.

This isn't sites coming to an end either, some sites are on phase 1 of 3 which about 100+ houses on each phase.

But there's certainly no new ones being started right now on a few very large sites.

 

[tony84]

A lot of the big boys have subbies doing things like 2nd fix. If they aren't building they arent paying those who are on day rates.

But they will still have a lot of employees - site foremen, sales people, buyers, office staff etc.

 

[IanSuth]

This is correct. They have basically got rid of the subbies who are right at the start of the builds. There's less digging and more second fixing in order to finish already started jobs.

This isn't sites coming to an end either, some sites are on phase 1 of 3 which about 100+ houses on each phase.

But there's certainly no new ones being started right now on a few very large sites.

And of course on multi phase sites there will be trigger points when they have to build/provide/pay for certain local amenities.

By careful planning of when they stop work they can avoid those liabilities (there was a case locally where a big developer stopped short of finishing some traffic islands so they never had to start on a primary school and local shops which were schedule in the planning for as soon as the roads were completed)

 

[DazRave]

And of course on multi phase sites there will be trigger points when they have to build/provide/pay for certain local amenities.

By careful planning of when they stop work they can avoid those liabilities (there was a case locally where a big developer stopped short of finishing some traffic islands so they never had to start on a primary school and local shops which were schedule in the planning for as soon as the roads were completed)

I didn't think about this angle of things. This could be the larger reason to slow down production but I still can't wrap my head around increasing the prices when house prices in general have apparently begun to fall (although according to Zoopla, mine has been increasing each month still!?).

 

[tony84]

I didn't think about this angle of things. This could be the larger reason to slow down production but I still can't wrap my head around increasing the prices when house prices in general have apparently begun to fall (although according to Zoopla, mine has been increasing each month still!?).

I assume the difference is you are looking at current housing stock where as sold prices are properties that have sold and completed?

There is a lag of a couple of months between one and the other.

 

[IanSuth]

I didn't think about this angle of things. This could be the larger reason to slow down production but I still can't wrap my head around increasing the prices when house prices in general have apparently begun to fall (although according to Zoopla, mine has been increasing each month still!?).

Remember some trigger points are set on a %/total number of properties being sold as well.

That 100th house sold might come at a huge cost to the developer