Poor planning results in house price rises

Bottlenecks in the planning system as a result of poor administration, are pushing up house prices and helping housebuilders improve their profit margins, said Joe Dwyer, chief executive of George Wimpey, last week.

Announcing Wimpey's interim results, Dwyer said that shortcomings of the UK's plan-led housebuilding system is limiting the overall number of houses built to 150,000 a year. Dwyer insisted the potential was 160,000-170,000.

"There is a scarcity and hence prices rise," he said. "Government, be it central or local, is having an influence on increasing the price of houses." Asked if housebuilders were suffering, Dwyer replied: "It is actually helping improve margins."

Dennis Brant, Wimpey's deputy chief executive, said: "There has to be more people in planning departments." Brant believed that planning delays were helping large builders gain market share, adding that this trend "will continue".

Wimpey doubled its pre-tax profit to £25 million, with turnover moving ahead to £590 million (£530 million). Material cost increases were pegged to 1-1.5 per cent, with Dwyer anticipating a similar low figure next year. There had been a one-off jump in labour prices as a result of the Inland Revenue's drive to get people to pay taxes, he added.

In the UK, the Wimpey Homes division completed 2,700 (2,400) properties at an average selling price of £73,000 (£70,000). Operating margins rose from 3.5 per cent to 6.4 per cent. Land bank spend was £8 million higher at £51 million.

McLean Homes had a near-static operating margin of 9.1 per cent (9.0 per cent) on an unchanged turnover of £210 million. The average selling price was well ahead at £98,000 (£88,000).

Wimpey's Partnership Housing activity, separated out from Wimpey Homes, enjoyed a much busier period than in the first half of 1997, completions jumping by 250 to 650. Average price was down slightly to £45,000 (£48,000).

There was a dramatic improvement in performance for Morrison Homes, planned expansion being assisted by healthy conditions in American markets. The operating margin rose from zero to 3.4 per cent.

Wimpey is upping its brownfield sites - at McLean Homes these now account for 26 per cent of total sites (up from 20 per cent) while Wimpey Homes took its commitment up from 42 to 47 per cent.

"I doubt if there will be a greenfield tax," said Dwyer. If there was, he promised to resist it. He said Wimpey would continue to increase its brownfield site activity provided it was commercially acceptable to do so.

Dwyer sees further growth ahead. "We have no fears about our ability to expand," he said, pointing out that while Wimpey Homes has stood still in recent times at 6,000 completions a year, after being on a level pegging with Barratt, the latter has pushed ahead to a figure of 9,000. "They have expanded rapidly," said Dwyer.