Our Marketplace

Competitive landscape

  • Inland Homes has positioned itself typically at the first and second time buyer end of the housing market where demand is very strong and has been largely unaffected by recent changes in Stamp Duty Land Tax.
  • Our land bank is predominantly in the South and South East of England where demand for housing is the strongest. We promote substantial sites through the planning process and obtain planning consents that would suit housebuilders to commence on site shortly after acquiring it.
  • The demand for housing in our place of operation significantly outstrips supply and has resulted in house price inflation, although we are seeing signs that this is slowing.

Key differentiators of Inland Homes

  • Inland Homes has a large and growing land bank of 6,681 plots, of which 1,163 have planning consent or a resolution to grant planning consent. The land is predominantly in the South and South East of England where there is continued strong demand from private housebuilders and Registered Providers of affordable homes.
  • Inland Homes has a clear and agile business model giving us the flexibility to realise value in the land bank through consented plot sales, sales to Registered Providers, housebuilding or rental income from investment property.
  • Our highly experienced management and specialist development teams have worked together for a long time, enabling the successful identification, securing of suitable land and maximising each project's potential. Our planning team, which has over 50 years combined experience, has a long track record of securing planning permissions across all our sites.

UK economic/macroeconomic conditions

Over the past 5 years the UK economy has steadily improved:

  • We have seen a significant population growth
  • Unemployment rates have dropped by 40%
  • Interest rates and inflation have remained very low
  • House prices have continued to rise

Business and consumer confidence since the EU referendum has begun to recover on the back of an accommodative monetary policy and a stable jobs market. Uncertainty is likely to continue but the Bank of England will continue its policy to soften the impact and economists continue to forecast growth in 2016 and 2017.

Implications for Inland Homes

  • Growing populations have an increased housing need which benefits both the Group's land trading and housebuilding operations as well as its residential lettings.
  • Low unemployment combined with low interest rates allow more people to access the housing ladder, which again benefits the Group's entire business.
  • House price increases directly affect the Group's housebuilding operations but also drives up the value of consented land and is a result of the lack of supply, demonstrating the longer term demand for new housing.

Carter's Quay, Poole, Dorset

Artist's impression of former Brooklands College campus, Ashford, Middlesex

Growth in construction costs

The shortage of skilled labour has been a significant factor in driving recent housebuilding cost inflation and is widely acknowledged as the greatest constraint to increasing the UK housing supply other than the planning system. A survey by the Royal Institute of Chartered Surveyors (RICS) showed that construction wages rose by 6% in 2015, well ahead of the 2% UK average, with bricklayers and quantity surveyors being the most in demand.

Materials cost inflation has flattened following a period of sustained increases from 2009, however these are expected to rise by 3.5% - 4.0% per annum due to the weakness in sterling.

Implications for Inland Homes

  • Rising costs in relation to materials will impact on housebuilding profit margins and we have begun to buy materials directly from suppliers rather than via main contractors in order to ensure we are obtaining the best value as well as derive further savings by becoming a bulk purchaser.
  • The skills shortage and resulting wage increases will also impact on the Group's profit and we have therefore invested in our own housebuilding expertise as part of a deliberate strategy aimed at addressing the growth in construction costs as well as being part of an expansion programme.

Constraints on UK housing supply

Constraints UK Housing Supply 2016

National skills shortages

National Skills Shortage 2016

Building material costs

Building Material Costs 2016

Artist's impression of proposed Abbey Wharf development in Alperton, Middlesex

Demand for housing

There exists a structural undersupply of housing nationally and in particular in the South East. There is an estimated requirement of 250,000 homes per annum. Government policies may help to stabilise house price growth but are unlikely to increase supply significantly, leaving an expected shortfall of 100,000 homes per annum.

Government initiatives

Demand

  • Help to buy – facilitates deposits as low as 5% through an equity loan scheme and represents 32% of Inland's unit sales
  • Help to buy ISA – government contribution of up to 25% of monthly cash savings (up to £50 per month)
  • Lifetime ISA – 25% government contribution to savings (up to £4,000)
  • Restrictions on pension savings by higher earners – lifetime allowance cut from £1.25 million to £1 million so buy to let provides an alternative investment option despite an increase in buy to let levies
  • Starter homes – imposed 20% discount for first time buyers in exchange for reduced requirement for affordable housing

Supply

  • Planning reform – focus on reducing the time planning applications spend with decision makers. A 'delivery test' is being introduced to ensure delivery of local homes within a reasonable timeframe.
  • Permitted conversion of offices to residential – permanent extension of permitted development rights from April 2016.
  • Relaxation of building constraints on green belt land – permitted allocation of appropriate small-scale sites in the green belt specifically for Starter Homes, designed for young families.
  • Government to provide £5bn to stimulate housebuilding projects – £2 billion to accelerate construction for homes on publicly owned land, £1 billion of short term loans to small housebuilders and £2 billion of long term funding for infrastructure to deliver up to 200,000 homes.
  • Local Authority land release – unlocking large housing sites

Implications for Inland Homes

  • This chronic undersupply underpins our sustainable business model for housebuilding, land trading and lettings operations.
  • We ensure that we are aware of and in a position to take full advantage of Government initiatives which increase demand, such as Help to Buy and Starter Homes – Inland Homes received a resolution to grant planning permission on one of the first Starter Homes schemes in the country at our development in Poole, Dorset.
  • Similarly, we participate in initiatives to ease supply by purchasing office buildings to convert to residential; by taking part in the Government's consultation on planning reform and being in constant dialogue with Local Authorities to ensure we are considered when large parcels of land are to be released for housing – this strategy led to our involvement with Southampton City Council on our Chapel Riverside project.

Gap between households and housebuilding

Gap Between Households

Seasonally adjusted trends

UK Housing demand gap

House prices to 30 September 2016

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