Housing correspondent BARRATT HOLMES on some market data which could further undermine the council’s financial schemes
Colm Lacey: about to put hundreds of flats on the private market as housing sector slumps
There’s a good reason why Colm Lacey, the council director who heads up Brick by Brick, did not want to share the company’s analysis of the housing market with elected councillors at a Town Hall meeting this week.
That’s because it looks like bad news indeed.
Brick by Brick is running at least nine months late in delivering its first new homes, since the company was established by Croydon Council in 2015. In those pre-Brexit days, the idea of borrowing £700million of public cash to turn scraps of council-owned land and property into private housing must have seemed like a sure fire way to make money.
But by March, when the first Brick by Brick plot, on Auckland Rise in Upper Norwood, is finally completed, the housing market in London may be taking its biggest hit since the global crash more than a decade ago.
Of the 57 units at Auckland Rise, 38 of them will be going for private sale.
According to the company’s own business plan, of all the properties Brick by Brick says it will complete in 2019, 71 per cent of them are for private sale, flogged off through the swanky new marketing suite that the company has just opened on George Street.
Hard times: estate agents have started to make losses, even in the London housing market
The BxB business plan paints a glowingly positive view of the housing market, but yet withheld vital analysis of the impact of Brexit: “All figures to be updated post-updated market analysis and approved by BXB board”, it says, rendering much of the report worthless.
Yet a quick shifty at a feature in the weekly estate agents’ advertising feature in the Evening Standard shows that not only is Croydon the fourth cheapest borough to buy property in the capital (one instance where being “cheap” is not always a good thing), but that house prices in the borough fell in 2018 by a whopping 2.6 per cent – that’s 13 times the average price fall across London.
That’s even with Croydon being among the leading boroughs to utilise the Tory Government’s Help To Buy subsidy for developers last year.
And just when Brick by Brick is about to release hundreds of private flats on to the market.
And that’s before Brexit.
A report this week by Bloomberg said, “With Britain’s pre-Brexit housing market gripped by fear, the London slowdown grinds on.
“The average home sale price across the city fell 0.2 per cent in the 12 months through October, preliminary transaction data from the Land Registry show. That’s the second monthly decline in a row.”
BxB’s Auckland Rise flats were built on the green spaces between existing social housing
Bloomberg charts the London housing market with a postcodes comparison map (annoyingly, it doesn’t include CR postcodes), and they say that prices have fallen for six consecutive months. “These figures come as national mortgage approvals hit a seven-month low and house prices across the country rose the least since 2013, according to the Nationwide Building Society.”
That was last year. Early indicators in 2019 suggest that things are about to get worse.
“Sellers,” Bloomberg says, “spooked by Brexit held off putting their properties up for sale” in January.
“After years of outsize gains in home values, London and its surrounding areas have so far borne the brunt of Brexit, with a lack of clarity over the future relationship with Europe causing both households and firms to hold off on investment decisions.
“Asking prices in the capital slipped 1.5 per cent from December to £593,972, the lowest level since August 2015, according to Rightmove. New listings in the first two weeks of the year were 10 per cent lower than in 2018 as owners were deterred by the cost of moving and concern about the political backdrop, the property website said.”
Colm Lacey is the council employee who Jo “We’re not stupid” Negrini, the council CEO, appointed as chief executive of a property development company when she decided it was a good idea for the Labour-controlled council to diversify into the housing market. Why Lacey couldn’t manage to include any of this recent, publicly available data, from the Standard, from Bloomberg, from the Land Registry or Rightmove, in his company’s business plan, we will leave you to decide.
But it is worth remembering that those private homes he’s trying to flog in a declining market were all built using public money.
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Councils and councillors live in a parallel universe. They should leave things like this to people who understand the real world.
You would have thought that a simple sensitivity analysis in the business plan would show how much the market needs to shift before it all goes pear shaped. Any company investing vast sums of money would know this, so you would have thought that Lacey could have told the scrutiny group. Perhaps this means they have been remiss in their financial due diligence. It is almost certain that the reason for the delays in the Whitgift redevelopment are as a result of proper sensitivity analysis which is probably showing that it is teetering on the knife edge of financial viability.
I forgot one thing though, it is very easy to gamble with someone else’s money which clearly Brick by Brick are doing.
Another nail in the coffin for Jo Negrini. Her whole plan for the regeneration of the London Borough of Croydon has just degenerated in the last few weeks. The Finance Officer who resigned before Christmas knew this bonfire of public asset value was on its way.
The concept of Brexit is often used as a whipping boy for managerial incompetence, when it’s Theresa May and the civil service’s public demonstration of “How Not To Negotiate” that has caused the unnecessary uncertainty that is being so damaging.
However, another major global economic crash has been threatening for some time now and we might find that 2 or 3 years of careful belt-tightening and debt reduction that sensible people and businesses will have already done may mean that the crash impacts ordinary people less.
Some, or all, of what you say may be true, Ron. But it is also irrelevant.
What is happening in the housing market right now is not because of some abstract notion or “concept of Brexit”. It is home-owners opting not to put their properties on the market because of the uncertainty of the situation. It is developers – including Schroders in Croydon – shelving all plans specifically because of a lack of certainty over The clusterfuck that is Brexit.
And all of that has seen the prices of homes in London, and in Croydon, fall, as buyers leave the market.
This is not “the concept of Brexit”. This is real.
What idiotic decision to select an existing council officer with zero experience of running a development company to run the borough’s new property development company. Jo Negrini signed off this decision. She must go.
I know a couple of small development companies who are having to sell existing assets to ride the current property calm. Brick by Brick cannot do this – they have no sellable assets as they’ve built nothing.