LONDON – Technology and changing demographics are having a huge impact on the UK housing industry, with some hopeful they can help alleviate the country’s housing crisis.
With these issues on the agenda, the UK’s biggest property conference, ResiConf, took place last week, and Business Insider attended.
The theme was fixing Britain’s “broken” housing market, a phrase borrowed from the government’s own white paper on the issue.
Fixes are sorely needed: there is a shortage of homes across the country, and builders are consistently failing to keep pace with demand.
Soaring prices and rising rents are pricing out first-time buyers and young professionals.
So what can be done to address the problem? Here’s what everyone was talking about at ResiConf:
1. Factory-built homes are ready to take off
- REUTERS/Petr Josek
Much of the talk at ResiConf focused on the topic of modular housing (less fashionably called prefabricated homes). Firms like Pocket Living have made their name building affordable homes which are assembled off-site in factories around the country, then shipped on-site on a lorry.
Some think they offer part of the solutions to the UK’s housing crisis, especially in cities where space is short.
London mayor Sadiq Khan certainly thinks so. Pocket just secured a £150 million loan from the London Mayor’s office, the government, and Lloyds bank to build more than 1,000 affordable homes by 2021.
The benefits? Due to the lower costs associated, Pocket is able to offer affordable homes made to a high specification at around 80% of the local market rate.
The drawbacks? At 38 square feet, one-bedroom Pocket homes are roughly the size of a London underground carriage.
That doesn’t seem to have deterred prospective buyers: the waiting list for an affordable Pocket home stands at 35,000 at the most recent count.
2. Proptech can bring down costs and free up land
- Reuters/Thomas Peter
Many of the sector’s game-changing innovations look set to come within the proptech sector – a catch-all term for property technology.
Business Insider met Land Insight, a software firm which pulls in datasets from local government and the Land Registry to help developers identify development sites cheaply and more quickly than traditional methods, which often rely on costly surveys and become bogged down in legal work.
Land Insight CEO Jonny Britton said a greater volume of information would encourage building and bring down costs. In a market low on space and short on time, it is unglamorous but important changes to development such as this which could herald the biggest changes for the industry.
3. Build-to-rent – “the American model” — could represent the future
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Build-to-rent is a relatively new concept in the UK, with most developments historically built for sale rather than for renting. But developers have recently started to capitalise on demand for a different kind of product, and there are now 83,650 BTR homes completed or planned across the country.
Living in a BTR home means living in a development designed for renters: typically it has communal spaces, amenities like gyms and swimming pools, a concierge service. Rents often include perks like Sky TV and gym membership.
That means premium prices, but in the UK developments often contain quotas of affordable homes which are let at between 65 and 80% of market value (at the 7,600-home development in Wembley Park, the UK’s biggest, 40% of homes are affordable.)
Build-to-rent also means no letting agency fees – because you rent directly from the landlord – and typically rents of three years or more which rise only with inflation, rather than at the whim of your landlord.
Institutional investors also like BTR: keeping all the properties in a building offers a steady, fixed income with a healthy yield of the kind that is attractive to pension funds and insurers.
It’s easy to see why the government thinks purpose-built rental blocks – which are already popular in the US, Germany, and France – could be an important fix for a market in which many simply cannot afford to buy.
“The [UK] market is ready to support far more build-to-rent. Although as a concept, it is relatively new in the UK, there is an opportunity to build on lessons from the established multi-family housing sector internationally.
“The US is now delivering around 300,000 multi-family homes every year, but it took them 30 years to get there,” he said.
“We have the opportunity to develop the sector more quickly here, by welcoming international investment and hearing from others.”
He outlined a £65 million loan package to build 7,000 mainly BTR homes in London.
4. Blockchain could revolutionise property sales
- REUTERS/Lucy Nicholson
Blockchain – essentially a tamper-proof ledger of permanently-recorded transactions – is the technology that underpins much-hyped cryptocurrency Bitcoin. Some developers are starting to let tenants pay rental deposits in Bitcoin, but blockchain’s potential applications in property go further than that.
Neil Singer is the founder of ClickToPurchase, a site which allows clients to exchange legally-binding contracts over the internet. It aims to put an end to the protracted and often messy months of a sales process which often results in a prospective buyer or seller pulling out from a deal without fear of financial penalties. It is the only site which offers the service, and has so far seen nearly £200 million exchanged on the platform.
Singer told a ResiConf audience that blockchain would be used for increasing numbers of UK property sales in the future. ClickToPurchase is in the process of building its own Blockchain, on which its sales will be permanently recorded.
“Our blockchain is actually live, in final testing, and will be openly available within a few weeks,” he said. “For the first time, property sales, actual legal transactions, will be recorded in a Blockchain.”
5. Rent controls are ruled out
Rent controls have been a hot topic since then-Labour leader Ed Miliband pledged to cap rent rises if he was elected prime minister in 2015. He wasn’t elected, but calls for rent caps have grown louder since. The Scottish government announced in April that councils would have the power to introduce rent controls, and Glasgow and Edinburgh look set to use the powers.
The Conservatives will not be introducing them, however.
Tory MP Alok Sharma, giving his first speech since he was appointed housing and planning minister in July, said at ResiConf rent controls were part of a “Marxist agenda” and pledged that they would not be introduced in this parliament.
He said the emphasis would be on growing the number of rented homes being built and delivering the government’s White Paper.
“There is a lot in it for you,” he told an audience of developers. “We will increase the quality and number of homes for the private rented sector.”