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In property terms, fallout from the recession(s) of the recent years and present times has taken the form of a slow-down in house building, seen nationwide. The government has had no choice but to implement some incentives to help and encourage construction companies and developers to start building again. However, there remain long-term concerns with the level of house building in the UK: new developments are scarce in comparison to the demand. In order to meet the 240,000 dwellings-per-year target, the government has had to offer a variety of incentives which include growth areas, Eco-towns, housing market renewal, and affordable housing initiatives. Some of these schemes were in fact set out prior to the recession of 2008 (for example, Eco-towns), and so ultimately the economic downturn has been a major blow to the projected path of increased house building in the UK.
The recent recession was hugely problematic for the smaller developers, as the banks weren’t confident enough in the economy to lend money to smaller sole traders or partnerships. As a result, the amount of businesses that started projects during 2009–2010 sharply decreased.
Alex Goode from Morgan Pryce believes that one of the major factors causing builders to hold back on residential development across the UK is a lack of feasible sites; “One could argue that the downturn in the economy has had a role to play in this. Some potential development sites are no longer profitable for companies, as a result of both a decrease in property values (negative equity) and an increase in material costs, etc.”
However, another fundamental issue is the amount of undeveloped land that is unable to be used for house building, due to the UK planning system. Add to this the current regulations that new-build schemes must adhere to, and it’s easy to see why development may have faltered. Builders could perhaps deal with one of the above factors if otherwise the climate was conducive to making a profit. But to deal with one obstacle after another is too difficult in the current environment, especially for the small developers who have been forced underground over the recent years.
Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.