The boss of London’s biggest housebuilder today urged the Bank of England to slash interest rates by a full percentage point to 3% by March to get construction moving again.
Rob Perrins, who is executive chair of Berkeley Group, said radical action was needed from Government and regulators “at pace” to reboot London’s stalled housebuilding sector in a “very challenging macro-economic and regulatory environment.”
He said: “There are a number of thing needed to get the feel good factor going again. The Bank of England is behind the curve, rates are 100 basis points too high. You can see that in all the job losses and the unemployment figures. We need rates down by 100 basis points to March if we’re going to get anywhere near the investment we need.”
The Government has set a target for London housebuilding of 88,000 new homes a year - and a national total of 300,000 annually. But in the first nine months of this year just 3,248 new homes were built for private sale or rent, according to figures from analysts Molior.
Perrins said it would be “tough” to reach those targets in the current climate of uncertainty with buyers continuing to “sit on their hands.” He said the Budget was “not as bad as it could have been” but the newly announced “mansion tax” surcharges on homes worth more than £2 million “just creates more uncertainty.”
The value of sales reservations secured in the six months to end October was 4% lower than the same period last year around 30% down on two years ago. Cancellation rates remain high.
Berkeley, which specialises in complex brownfield regeneration projects, is currently working on 32 sites, mostly in London.
Perrins said that while he welcomed initiatives such as the “emergency” reduction in requirements for affordable housing from 35% to 20% of schemes, these were not being implements fast enough to move the dial.
He also said investors were being unsettled by the Renters’ Rights Act due to come into force in May because of fears it will lead to a huge backlog of court disputes between landlords and tenants.
Perrins said he had seen some improvement in the performance of the Building Safety Regulator (BSR), which has been blamed by many developers for the slowdown in housebuilding in London because of the long waiting times for fire safety “gateway” approval on new buildings.
The Government appointed a new BSR boss, former assistant commissioner of fire safety at the London Fire Brigade Charlie Pugsley, as part of a package of reforms in June.
However, the Berkeley head cited the example of one London development where the company has been in negotiations with a BSR appointed structural engineers who did not accept its computer calculations for 44 weeks.
Richard Hunter, head of markets at the interactive investor platform said: “For the moment, Berkeley finds itself wading through treacle given guarded consumer confidence and the possibility of higher for longer interest rates keeping some potential new buyers on the sidelines.
“Even though the revitalised planning system is in train, it will take some time to bed in and the group has also pointed to the overhang of additional building regulations as part of the new industry regulator’s formation. More positively, its longer-term ambitions look perfectly feasible with its land holdings currently equating to £6.51 billion of future gross margin.”
