London property prices are never far from the news, and the seemingly unstoppable rise in value reflects heightened demand driven by low interest rates, buy-to-let landlords, good mortgage availability, the Help to Buy scheme, a growing population, and overseas investment. Yet although prices have recovered to pre-crash levels, the volume of transactions hasn’t, and only at the high end of the market have sales reached pre-2007 numbers.
A disconnect between house prices and salaries
By why has supply not risen to match demand? Why have developers not moved to capitalise on this obvious market opportunity by building more homes? The simple answer is a lack of available land within London and across the south east. Which means house builders are being compelled to look beyond the home counties when acquiring new plots for development. And buyers, squeezed out of the market in London because of the disconnect between house prices and salaries, are following suit. Faced with the prospect of unaffordable mortgages and an overheated rental market, many people are choosing to accept a longer commute in exchange for greater value elsewhere.
London at the epicentre of house price growth
The knock-on effect of this can be seen in rising prices in the regions bordering the home counties. And although price rises have not been as sharp as in London, the effect is still measurable. According to a recent white paper published by PricewaterhouseCoopers, house price rises since 2009 spread out from London in a series of bands or waves that emanate in a north westerly direction from the capital. It paints a remarkably clear picture of the knock-on effect that London’s property market is delivering to the rest of the country.
The challenge facing house builders
For house builders, the demand for new properties is strong, and the challenge is how best to meet it. The obvious path would appear to be a headlong rush to acquire more land and to roll out extensive developments where the mix of availability and prices offers greatest profit opportunities. But in these uncertain times, large investments are accompanied by large risks. Developers may try to anticipate market movements, yet this is an impossible task in a market driven by so many factors, including UK and global economic fluctuations, housing policy, uncertainty over EU membership, and competitor activity. The only rational choice therefore is to pursue the classic risk mitigation strategy of diversification, building a broad-based development portfolio that doesn’t rely too heavily on any single factor or geographic region.
Faced with such a complex commercial environment, housing firms require leaders with a diverse range of skills and experience. They need people with the acumen and vision to navigate through a rapidly evolving environment. Identifying and recruiting such people requires the services of a specialist housing executive search firm like Stone Executive. Our housing headhunters have a wealth of experience in housing executive search and boast an outstanding track-record of delivering on the most challenging of assignments. Experts in housing executive recruitment, our professional network spans major housing companies, regional developers, professional bodies and the brightest talent in the business.
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