Out-Law / Your Daily Need-To-Know

CIL is "squeezing margins" in the housebuilding industry, says Knight Frank report

Out-Law News | 29 May 2012 | 4:59 pm | 1 min. read

The Community Infrastructure Levy is causing "disquiet" amongst housebuilders, who fear that the levy could lead to a decline in the supply of residential development land across the UK, according to estate agency Knight Frank.

The levy on new development is already “squeezing margins” and, teamed with other policy developments such as the National Planning Policy Framework (NPPF), could hamper the delivery of new housing, said the company.

'Housingbuilding 2012' is a report produced by Knight Frank's residential research team, which undertook a survey of more than 100 builders to assess the opportunities and challenges facing the UK housebuilding industry.

The content of the NPPF has been largely welcomed across the industry, the report said, but it is not expected to have any positive impact on housebuilding in the near future due to the confusion and delays that could result from the “bedding down” of the policy over the next year.

Nearly half of the respondents to the survey said that they thought the Government’s move towards 'localism' would slow down the process of securing planning permission and 54% of respondents said that the plan could result in a fall in development volumes from where they would otherwise have been.

"The NPPF is a step forward. However there is a lot of room for interpretation and as such I believe it will take a couple of years, and significant use of the appeals process before it settles down," said Steve Morgan, chairman of property developer Redrow, in the report.

The Government's New Homes Bonus is not supported by housebuilders either, according to the report, which said that in the second year of the bonus allocation there has been a notable rise in the number of respondents who think that the scheme will have no impact at all on development volumes. Some 80% of those surveyed said that the bonus would have little effect.

The New Homes Bonus was introduced last year to encourage local councils to approve plans for new homes. In return they receive a payment matching council tax income for each home built or brought back into use, with an additional bonus for affordable housing.

Housebuilders were generally in support of the Government's NewBuy scheme, which aims to boost the availability of mortgages by housebuilders and the Government providing a 'guarantee' for the mortgage.  Two-thirds of respondents to the survey said thought the scheme would result in a slight rise in development volumes, and 70% said that it should result in a modest rise in sales.

Some housebuilders expressed "dismay" at the high interest rates on such mortgage loans, said Knight Frank. "Our survey shows that lack of mortgage finance remains the biggest risk to the performance of the housebuilding sector over the next 12 months."

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