A Radical Solution for Bigger, Cheaper Homes

Posted on 15 July 2007 by Ray Boulger

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The Politics Show on BBC1 today had an interesting 20 minute item comparing the situation of German homebuyers with their British counterparts, followed by an interview with Yvette Cooper, who struggled with many of the challenging questions from the presenter, Jon Sopel.

The average price of a German home is well below a comparable UK home and Germany is one of the few European countries which hasn’t seen a big increase in property prices over the last decade. According to the BBC, average earnings in the UK are about 10% higher than in Germany, whereas the average UK home costs about 1/3 more than its German equivalent. Another important difference, although it was not mentioned on the programme, is that only about 40% of Germans own their own home, compared with 70% of UK residents. 

Two key points made by Paola Buonadonna, who presented the programme’s package from Germany, were that the green belt is not as sacrosanct in Germany as it is in the UK and that local authorities in Germany are given much more control over where, and how much, development takes place.

Presumably building costs in Germany are similar to in the UK and so it is the value of land which is different. Germany has a similar size population to the UK but a significantly larger land mass and so it is natural that on average the price of any given sized plot of land will be lower in Germany. However, despite this the programme pointed out that the proportion of land built on in Germany is higher than in the UK. This keeps down the price of a building plot, as well as allowing a larger average plot size.

This raises an interesting question which perhaps the UK should debate. Preserving the green belt is such an emotive issue that all political parties normally fight shy of suggesting any of it should be built on, and when any such proposal is made there is nearly always a big local outcry from existing residents, most of whom are already homeowners.

It is of course important that a good level of open spaces and amenities are available locally for existing residents, but 90% of the UK is not built on. Much of this land is not be suitable for development but some is. The Government’s preferred option for new homes to be built on  brownfield land, i.e. any land that has previously been used for any type of development, even as a rubbish tip.

Another part of the Government’s current strategy is to force developers to build to a much higher density than used to be the norm, to maximise use of the limited land available. This results in a much higher proportion of new homes today being flats, to such an extent that builders have to discount flats to get rid of them, whereas the demand for houses is much stronger.

A disproportionate number of repossessions over the last year have been new build flats purchased, often at a so called discount, by Buy to Let investors, on developments where a very high proportion of units were sold to investors, who then struggled to find tenants, because they were in competition with so many other investors.

The German model of using about 13% of their land for development, compared with 10% in the UK, accordance to figures quoted by the BBC, means that by allowing an extra 3% of the land mass to be developed not only is the price of a plot lower but the average size is larger.

If people were simply asked if they were in favour of building on the green belt I have no doubt there would be a massive majority saying no. However, if the question was “If by using an extra, say, 3% of our land for building you could have a larger house at a lower cost” I suspect a significant majority would say yes. Certainly those people who would like to buy but can’t afford to would nearly all vote for that.

Category: Buy to let, House and home, Property market

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