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Current trends - a contrarian view

Economically, we have looming challenges to the living sector, but we have almost 15 years’ market movement under our collective belt since the last great unpleasantness and perhaps things are different now. Ultimately, it is all about supply and demand (and hopefully a profit element in there somewhere), but let’s look at some of the elements that contribute to that in the housebuilder sector.

On the supply side, land and material costs are challenging. Land prices are probably too hot – both for strategic and immediate sites, where landowners have minimum price expectations guided by their land agents, and everyone is looking over their shoulders at what has being agreed on other schemes. In the same way that London office rents were driven upwards through the nineties to vanity levels that, some would say, did not reflect the real value of the underlying assets, land prices are heating up for desirable sites and that has to filter through to house buyers further down the line. Couple that with significant upward pressure on construction costs, and it makes for an uncomfortable margin squeeze for developers.

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Pips are getting squeezed, and the recent SDLT holiday was great for driving sales
activity and house prices up, but bad for medium term house pricing.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.

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