Garden City proposal runs the risk of furthering the housing bubble

Will Davies, MD of London’s largest property maintenance firm, aspect.co.uk, believes George Osborne is right to boost the construction sector with the new Garden City at Ebbsfleet in North Kent, but still has reservations. Showhome sat down with him to hear what developers and the Government must consider.

 

Tell us a bit more about you and how you got into the property industry

I spent about seven years at Société Générale doing private equity banking. Through it I met someone whose property maintenance company wasn’t doing as well as they’d hoped. After looking into it, we decided to set up a business together to deliver what we felt was lacking from that market.

 

Why do you feel Ebbsfleet was chosen as the site for the new Garden City?

A lot of people have complained that it’s focusing on the South-East again, but it’s around there where there are significant issues with housing shortages. It’s therefore not enormously surprising that that’s where they’ve focused on. It’s the first project of this type, so maybe they’ll just dip their toe in the water and use it for a model elsewhere in the country if it works.

I was a bit surprised to see that they’d chosen a floodplain, though. We’ve spent the last few months cleaning up the country after all the flooding we had, so building more houses on an area prone to flooding was a bit weird. Hopefully they’ve thought about the way they construct houses on floodplains and they’ve got ways of preventing the damage we’ve seen this year. We haven’t seen a great deal so far as to what they’re going to do differently and how they’re going to protect this area of housing, but I’d imagine that as the project moves on, we’ll hear a bit more about it.

 

Could it be argued that building new towns elsewhere in the country – Manchester, Birmingham and the North-East, for example – would be a better place for a new town, both in terms of encouraging people up there and creating jobs?

I think at the moment it’s more about a solution than a cause, so to speak. It’s other things that drive people to locate where they do – not necessarily the availability of housing. If we made more houses available in Manchester, are people going to necessarily move there? Or, actually, do we need to deal with the housing shortage in the South-East while also dealing with the potential housing bubble problems that are on the horizon? We’re definitely seeing huge price increases on areas around London.

As a company, we do a lot of property development work in the postcodes that, in the past, would not have been the attractive ones – Crystal Palace and so on. There’s a lot of areas of London where prices have just gone through the roof, so unless they can create capacity for people be able to afford to move out of London but still be within range of the capital, there are going to be problems.

 

Do you think the house price increases are down to Help To Buy, or is it more complex than that?

I don’t think it’s got anything to do with Help To Buy, if I’m honest. Interest rates have been kept low, and we’ve seen a lot of investment in London property but very little movement. There’s limited supply and a lot of demand, which seems to create this sort of situation. It’s not always at the lower end – we’re seeing a lot of £500,000-£1 million properties that are highly sought after and low in supply.

 

So you’d say there’s a need for high-end housing?

I think there is as well. You can deal with the problem at that level – people are having to move out of expensive, large properties into houses that would in the past have been more for first-time buyers. The people who get hit are those trying to get onto the ladder in the first place. Everyone tends to get shunted down the ladder, because the prices keep going up and you have to set your sights a bit lower.

 

Do you think the idea of a ‘Garden City’ is a bit outdated? Why build a whole new town when there are towns in need of renovating in the area?

It’s something that hasn’t happened for a while – and we don’t want to end up with another Milton Keynes – but it’ll be interesting to see how a planned city will work. What are the developers able to achieve nowadays – new facilities, efficiencies and technology? Renovating towns isn’t going to necessarily change the situation, but if we see what we can do with a clean slate in terms of costs, we should be able to build more new homes to help solve the shortage compared to just improving what’s already there.

 

It’s a chance to implement new ideas and technologies that we may not have had 40 years ago.

It’s potentially very interesting to see what they can do with it. I just hope that we don’t end up with an eyesore that we’ve ploughed money into and nobody wants to live in.

 

Or a white elephant that becomes an unloved ghost town in North Kent.

It could happen! If you go around the world, to Spain for example, there are developments that they’ve ploughed a load of money into and nobody’s living there. They need to make sure that the new town and the wider area have enough there to entice people to want to live there, and that when it’s built there’s going to be demand for the housing – it’s going to look pretty silly if loads of money goes into it and half the units remain unsold.

 

Are you confident that that will happen? Will all the units get filled, in you opinion?

It completely depends on how they’ll go about it. If you look at developments in and around London – Kings Cross, for example was a horrendous area – there has been a lot of development and blocks that have popped up all over the and people have gone straight in. It’s all down to the shops and facilities that are there. If people think an area is going to work then they’ll move there. But then there’s a feeling that if nobody wants to move there, you’ll struggle to attract shops and restaurants and whatever and the situation gets worse and worse. I wonder how they are going to go about pre-filling units. Where it’s a private development, it’ll be done in a way to generate the return that they need to. In a situation like this, though, where it’s Government-organised and funded, are they going to take that approach and try to get a decent return on it?

It will also be interesting to see if there are going to be any methods in place to ensure that UK house-builders and construction companies are going to get the work. You can see us constructing this city using overseas companies and cheaper labour. It’ll be nice to see something that will bring a boost to the industry here – at least take a better approach to it than we did with the Olympic site, where a lot of that investment sort of walked out of the door.

www.aspect.co.uk

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