AS CHIEF executive of the largest housebuilder in Scotland, Pete Redfern is enjoying the positive buzz that is feeding back from his sites north of the Border since Holyrood rolled out its version of Help to Buy, writes Dominic Jeff.
The Taylor Wimpey boss’s Scottish executives have reported that visitor levels to their sites and showhomes were up by about a third on the first weekend since the scheme was rolled out, suggesting that thousands of young Scots have been given renewed hope of getting onto the housing ladder. That is likely to start driving prices higher, although Redfern, 43, expects the rate of increase will be small.
He has every reason to be cautious – the crash that followed the credit crunch almost destroyed the housing giant he helped create six years ago, taking it from being a FTSE 100 company making more than £500 million a year in profits to a loss-making outfit barely able to cover its debts.
Then the youngest chief executive in the blue-chip index, Redfern found himself fighting to keep his job and to keep the firm afloat. Thousands of staff were laid off and almost £2 billion written off the value of land and goodwill from the merger of Taylor Woodrow and George Wimpey. He was also forced to sell off the firm’s US business.
Now, with Taylor Wimpey rebuilt along slimmer, more profitable lines, he is optimistic about a smoother ride.
“All this housing bubble talk is misleading,” he said. “In 2008, prices fell by 22 or 23 per cent and everywhere outside London has only recovered a few per cent since then.
“I do think you will see a bit price inflation in the next year but if it’s in the 3 per cent normal range that shouldn’t worry us. If it ran at 7, 8, 9 per cent for three years I would start to be concerned, but that would only take us back to where we were at the peak, in nominal terms, and nowhere near that in real terms.”
He also doesn’t think there is major risk from the second phase of Help to Buy, which George Osborne last week said would begin ahead of schedule, and support those buying older homes as well as new builds.
Redfern points out that a small amount of 5 per cent mortgages had already crept back in to the market before the scheme was launched.
He said: “We have a long-term view of our business and the market that we operate in, so we would not be in favour of a scheme that we felt gave very artificial short-term conditions and then cause a problem a few years on.
“Most of our investments average about five years and some are ten or 15 years long. As we are buying large sites, we want a consistent steady market, we don’t want boom and bust.
“I would only be concerned by what happens when the scheme comes to an end if it were badly managed. If the underlying economy strengthens and withdrawal is well signalled, and ideally staggered, then the risk is very low. Like any of these schemes if it is badly managed, that creates a risk.”
With the subject of housing having become increasingly politicised over the past few years, Redfern recently wrote a response to proposals made during the Labour Party conference. He says he wanted to “dispel some of the myths” about so-called land banking – a process by which critics claim large developers make money from rising values by holding back on development. Three independent reviews have found no evidence of the practice, and Redfern was clearly dismayed to hear the accusations surface again.
“We just don’t do it, it makes no logical sense,” he said.
Instead, he says it is the complexity of the planning system that is the real constraint. Even after builders are granted consent in principle, large developments usually have to meet dozens of conditions before they can go ahead.
Redfern insists he is not favouring any particular party, he is just worried the increasing frenzy of the pre-election years will lead to old promises being forgotten and new ones made in haste.
Redfern says the real risk that could drive prices back to unsustainable levels is a lack of supply and growing demand. However, the general pick-up in the economy and the boost from Help to Buy means building is gathering pace.
Although only a proportion of those extra customers visiting sites will buy a house, Redfern expects volumes across the industry to grow by “low double-digit percentages” in the next few years.
“That’s a pretty fast rate for an industry to grow, but we’re bouncing off a pretty low level,” he said.
Scotland is likely to be one of the fastest-growing areas in terms of output after lagging behind the recovery seen in parts of the south of England. In London, a lack of land with planning permission will probably keep the rate of growth lower.
Redfern said: “The scale of the downturn has been more muted in Scotland than in a lot of England so it’s been a pretty robust healthy market, and it’s a very key one for us. We will continue to invest in our Scottish businesses.”