Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

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Monday, 20 May 2013

Lessons to be learned as the UK lurches towards housing crisis

Interesting article in The Week magazine discussing Britain's coming housing crisis.

The crisis has been known about for some time but very little seems to have been achieved to date, and Britain cruises towards it like a ship quietly approaching an iceberg. Let's see what we can learn:

UK housing shortage

The Week reports a "chronic shortage of affordable, good quality homes" in Britain.

Over the next decade it is estimated that 270,000 new homes will be needed each year, yet on average only 147,000 are being built.

And last year house-building dropped to only 100,000, the lowest level since 1924.

The UK population is growing, although not as fast as that of Australia.

The 2011 Census showed that the British population increased by 3.7 million people over the decade since the previous Census in 2001 and is forecast to reach 70 million by 2027.

But the problem is really becoming exacerbated by a migration of the population towards the south-east of England.

For example, the population of East Anglia, as noted here, is forecast to increase by 500,000 people in the next two decades with some 24% more housing needed.

Counties such as Cambridgeshire, Suffolk and Essex will see strong population growth.

Brownfield land

To solve this problem politicians have become attracted to the idea of building on brownfield sites (land that has previously had a permanent structure on it) as these available sites have the potential to fit in some 1.5 million new homes.

However, there has been much political wrangling, largely due to the potential that greenfield land could also be released and vested interests are making progress towards new home construction painfully slow.

One problem with brownfield sites is that it they tend to be expensive to build homes on - there is on average some £200,000 per hectare of demolition work to be carried out before developers can build the much-needed homes on them.

These locations are often seen as less desirable being located in run-down parts of cities or former industrial sites.

This, combined with the fact that some sites are contaminated, makes brownfield sites a tricky proposal for developers.

The bungalow paradox

The fastest growing section of the population and as such the one which will be a major driver of the coming housing crisis, is the over 65s, the number of who is expected to increase by 50% in the next couple of decades, to 15.5 million by 2030.

There is a chronic shortage of appropriate housing stock for downsizing in old age. Reports The Week:

"Survey after survey has shown that the preferred home for pensioners would be a bungalow - indeed it would be the home of choice for around a third of the population. However, bungalows constitute just one in 50 British houses".

It appears that developers are unwilling to build more single-storey homes due to the land space they take up which does not fit well with the developers' preferred density of 35-50 dwellings per hectare.

Lessons to be learned

The housing shortage crisis in the UK is going to be caused by a combination of factors:

-growing population

-population migration towards one part of the country

-population choosing to live in different property types

-diabolical planning and endless political wrangling

-widespread NIMBYism and environmental concerns about population spread

-expensive demolition and construction costs

-difficulties obtaining construction finance

Will Australia's planners and politicians take heed from any of this? Well, one hopes so, but I'm doubtful.