Roskov, Book 22, page 19
‘What we think … is that if unchecked … the figure will be higher, so we’re working to dampen prices, no need to try and boost them. If average rises are five percent year-on-year then we’ll be happy but vigilant.
‘If they rise too quickly we’ll build more houses, but that will have a small percentage effect, no rollercoaster in house prices seen, up one month and down the next, the effects will be small and measured, and slow.
‘House prices will never jump up thirty percent in a year and drop twenty percent the next year, they move slowly always.
‘And what the various commentators need to keep in mind … is that more housing stock being built, more young couples buying houses and then white goods, is good for the economy, the shops and the factories.
‘Fewer young couples setting up home is bad for us, and those young homemakers are a good barometer of a healthy economy. If house prices double, shops sell less and factories make less as a direct result.
‘Moving house is a key indicator in the economy, as well as a key boost to our economy. Anything that slows house movement slows the economy, and very high house prices will freeze that market – and factories here will close as a result.’
‘So the sale of fridges and curtains and sofas … would slow to a trickle.’
‘They would, no new homeowners, just older people moving sideways to similar properties. Something we wish to avoid obviously.’
‘And the disjoint between wages and house prices?’
‘Wages will always rise in a healthy economy, by up to five percent a year would be ideal. Higher than that and we see inflation, and interest rates may rise. We do want wages to rise, but in a measured way, no sudden sharp rises -’
‘Followed by the inevitable recession.’
‘It doesn’t have to be inevitable. We know what may happen, we’re sat here discussing it and in the media, we all know what the factors are and what the markets could do and might do, and we have some tools to try and dampen the excesses.’
‘And if a thirty grand house goes to a hundred grand…’
‘It would be a disaster for the country, new young couples renting not buying, a strain on shops and factories and white goods, a stagnation in the mortgage markets, several generations of couples not being able to buy, and a strong disjoint felt between wages and house prices – and the obvious complaints to follow.
‘Thatcher wanted more homeowners, for the obvious economic benefits to our country, fewer council houses and lower council subsidies, and we also want more new young homeowners, fifty-percent mortgages to become widespread.
‘But we have to be measured in what we do … and not force up house prices by mistake, which is why we’re supporting and funding Roskov in building new houses as well as renovating old abandoned houses.
‘And our High Street regeneration plans will create tens of thousands of new apartments, a downwards pressure on rents.’
‘Three Labour terms, at five percent rises, equals a doubling of house prices.’
‘Three terms is a long time, and that rise might be inevitable as the economy grows, but we will monitor it each year. And we’d be hard pressed to sell the idea to the voters that house prices should stay as they are for fifteen years.
‘We don’t want house prices to go sideways, we desire small increases, so across fifteen years – yes there’ll be significant rises. But during that time wages should rise as well.’
‘And the worst case scenario…’
‘That would be house prices rising quickly but with wage stagnation seen. If wages stood still yet house prices trebled … our economy would be hit hard, and that benefits no one.’
‘You’d be voted out of office,’ the man cheekily suggested.
‘After two or three terms of wage stagnation and rising house prices … we’d be chased out of office by an angry mob!’
‘Prime Minister, thanks for your time, and we hope you’re never treated like Frankenstein’s monster and chased away by the angry villagers.’
Solutions to problems
The next day, and Barratts Homes came to see me at their “urgent request”, most of their board and main investors making the journey. We made them tea in the property business boardroom, the good biscuits were issued, Russel in the meeting with his deputy plus our CFO, David Hutton, Chessington and Greg.
Sat, the main man - white-haired and stern-faced, began, ‘We’re keen for more joint ventures … since we already build houses for you, and we built Ronnie Masters House for you of course.’
‘How many new houses do you have planned?’ I asked.
‘Around the UK, ten thousand, but it varies seasonally, mostly we build in the summer.’
‘And if I commissioned twenty thousand on top, and paid sixty percent up front?’
The man’s eyes widened. ‘We could build more, dependent on local councils and … winning the contracts of course.’
‘But at the moment you build within your budgets, yes,’ I pressed.
‘Of course.’
‘So I could loan you a few hundred million, and those budgets expand, and you bid for more houses…’
‘Well … we could, yes.’
‘Could you come up with a ramp-up plan, a steep ramp-up, some examples and projections?’
‘We could, very soon, but it all comes down to cash flow, as with every business.’
‘So plan for an extra two hundred million quid, a loan, and work some figures – as to how many extra houses you could build.’
He turned his head to a younger man in a smart suit.
That man hit his calculator proficiently as we waited. ‘An extra twelve thousand houses started, assuming some winter building. And with that loan we could shave some costs for you as well. We have credit arrangements with suppliers, but if we paid upfront fifty-percent with them we’d secure better deals.’
‘Got any shares you wish to sell?’ I asked the main man.
‘Some, yes, but not a majority share. Sixty million would get you seventeen percent.’
‘We’ll look at the purchase of shares very quickly, and the loan-in would be smoother afterwards, and sixty percent upfront is fine by me. But we’re interested primarily in houses or apartment blocks south of Birmingham.’
‘We can see what we have on the books, and bid for more estates south of Birmingham. Can we … mention your name?’
‘You can, a joint venture, the local councils like me. And we’d be interested in apartment blocks, lots of them, but quality apartments, just two floors high.’
‘That’s what we build for you here.’
‘Yes, more like that, a great deal more – they stand as a bridge towards a new home when young couples don’t yet have the money for that new home.’
‘Have a word with Blair, he can order the councils to free-up land.’
‘Is that necessary?’ I wondered.
‘The councils are lazy and dead slow, and we have old laws about not building on green fields.’
I nodded at that. ‘I found the councils slow … till I shouted and threatened and bullied them in the media.’
They laughed.
‘You’re bidding with us for a place near Watford…’ the old man noted.
‘Yes,’ Russel cut in. ‘A new estate near the rail lines.’
‘There’s permission for five thousand houses in that area.’
‘In which case … bid for more houses,’ I suggested. ‘A mix of apartments thrown in, and some posh houses as well. And mention my name and … that money is available.’
‘They watch the news, they know the score,’ the old man suggested.
‘When it comes to new houses and apartments south of Birmingham … I want a surge for the next two years, then a steady build ongoing.’
‘We can gear up for that and adjust later,’ the old man offered.
‘And we will look at any bids you have in north of Birmingham and in Wales and Scotland.’
‘We don’t do Scotland, but we have projects in Wales, we can send you the details.’
‘Please do.’ I faced Russel. ‘Any comments?’
‘We make use of them now, they do a good job, but it does come down to the weather, the build schedule.’
I told the old man, ‘Find a way to predict the weather and keep building, we have a lot of houses to build.’
‘We have large tents that we use sometimes. They add to the cost and fly away sometimes, but they do speed things up.’
‘Use them please, and invest in more and better tents, none that fly away. I have a big need this year, less next year, less the year after that. I want to hit the housing market shortage and see what effect we have, then adjust our plans next year.
‘But what’s your gut feeling … as to the effect that our new plans will have on house prices?’
‘We can see a new optimism and more interest in buying off-plan, I think they’ll all sell quickly, especially inside the M25. This batch won’t knock back prices any.’
‘And how many do we need to build to knock back prices?’ I posed.
‘Forty or fifty thousand south of Birmingham.’
‘But other companies are building as well,’ I began. ‘So how many do you need to complete in two years to have that effect?’
‘Say … thirty thousand.’
‘So let’s plan for that, then assess and see.’
‘You want to knock back prices?’ he asked.
‘I want them steady, not knocked back, I want small increases seen and felt, no large sudden increases.’
‘The rises are micro-regional, and some areas do well, some go sideways. It’s down to what’s new and trendy, and some areas rocket for no visible reason, especially around London.’
I nodded. ‘Fads, and being in with the in-crowd. Do you build cheap four-floor apartment blocks?’
‘We do, we build all sorts.’
‘I’d be very interested in lower-end apartments inside the M25, the closer to London the better.’
‘Councils there insist on some in each estate, so we add them on.’
‘I’d want an estate of them, not tagged-on as an afterthought, so see what land is suitable and what the local councils think. Tell them … that I’m interested in social housing. But in reality it’s lower-end and not social, the tenants will need a good job and to sign a rental contract.’
‘Easy enough, the councils like such housing.’
‘As soon as you have the bid accepted … we’ll chuck you the sixty percent, or you take it from the loan. But what about work gangs?’
‘There are many out there, not paid by us, they work job-and-finish. We can have more on standby, and some come down from the north and from Wales. We won’t stall because of the lack of men.’
Russel put in, ‘Can apartment blocks be worked on in the winter, prefabricated blocks?’
‘Yes, if they’re tower in design.’
I told the main man, ‘So plan a winter schedule, towers for us, less wasted time.’
‘That we can do.’
‘I have a wide interest, so if it houses people inside the M25 … build it.’
‘Tower blocks in Southampton’s new waterfront development?’
‘Yes, definitely. Send us the details.’ I faced David Hutton. ‘Anything we need to consider?’
‘Apart from the weather, just the interest that buyers will show, and will they buy?’
The old man put in, ‘A lot of interest out there, no slow-up yet. And we have a shortage around the UK, felt mostly in the southeast.’
Greg put in, ‘There’s talk of permission to build towers east of Battersea, the waterfront.’
The old man nodded at him. ‘Be able to start in six months maybe, bids in now.’
‘Any social housing in the mix?’ I asked.
‘One in five towers must be social, or at least affordable.’
‘So assume that I’ll fund the one in five, as well as a few others. And your gut feeling about London prices?’
‘Docklands will rise rapidly, and there’s a lot of interest out there around London, no slowing at all, a new optimism.’
‘Have a look at social housing towers, anywhere south of Birmingham, and keep me in mind. They need to be studios or one-bed apartments, small, for local workers not couples.’
‘Most developers avoid them,’ he responded. ‘You’d manage them?’
‘We would.’
He nodded. ‘No shortage of councils wanting them built, so we’ll chat to a few councils. London councils always want some tagged onto posh projects.’
‘So, anything else we need to discuss today, since you got what you came for…’ I posed.
‘We’re happy,’ he told me.
‘Got a man that wants to live in Leicester?’
The young man lifted his pen. ‘I was born in Crotchely.’
‘Local boy then. Did you want the chance to move?’
‘We discussed it, yes, to streamline things.’
I faced Russel. ‘Find him a good desk, get him a computer.’ I faced the man. ‘Family?’
‘Wife, and a sprog number one on the way.’
‘House prices here are a bitch,’ I told him. ‘But we’ll sort you something at a discount.’
‘A year’s rent would be fine, two bed apartment or a house.’
‘House. Think of the noise for your neighbours.’
They laughed.
I told the old man, ‘I want those shares at a reasonable price, as if the extra work was not factored in. Then you’ll have ten years’ worth of building work to occupy your time; the kid will be playing soccer by then.’
‘I’ll be retired by then, and maybe in Corsica,’ the old man joked.
‘I can get you a good deal on a villa when the time comes.’
‘Counting on it.’
A second man asked, ‘Can we release this to media?’
‘Not until the ink is dry on those shares, then you can release it.’
He opened a case and handed David Hutton an agreement for the shares. ‘We came prepared.’
I smiled. ‘David, check it then have Russel buy the shares, but I want the shares spread around the suitable funds, no Government money, some charity money.’
Guests thanks, hands shaken, and the man with the calculator would stay, he would meet people, and he would keenly look at local house rental lists like a father-to-be. I had Laz check him out.
Barratts
In the morning the Barratts share deal news was released, and it made the BBC news, my funds buying into Barratts. But they made it sound as if I was buying the shares personally.
My first meeting of the day was to discuss the outline of the new cancer hospital. I told my architect and the senior Swedish men, ‘We need a Phase Two and a Phase Three, for cancer patients that are sick but alert, or sick and definitely not alert.
‘If someone is up and walking around they don’t come to us unless for treatments and assessments. But we do want a kind of Phase Zero for guests - and people that are part of research programmes, so if a guy comes for blood tests that last a week he gets a nice room, a small apartment.
‘And while I think of it, I want a full-size gym and swimming pool nearby, not part of the hospital but available to staff and people living close by.’
They made a note.
‘That gym and pool needs a good café and a small bar upstairs, a social centre. So, we need a reception centre for each of say three main types of cancer, we need the treatment rooms and labs, so go and ask the medics we have how we structure it – to have rapid blood tests done.
‘I want people driving in, blood taken, results issued the next day on the phone. So allow for parking, lots of parking, rain shelter walkways for them.
‘Behind the welcome centre and basic treatments area is the place where cancer patients are issued a bed, our Phase Two kind of, so it would be like a hospital ward but with individual rooms, and with all the facilities that would be needed, toilet etc.
‘That just about equates to a Phase Two, because they’ll still have a quality of life; they can watch the TV and read a book. We would want to hold two thousand of residents, many communal areas for a cup of tea and a chat. Think like our Phase Two now for the communal area design.
‘When they get to be at the stage where a quality of life no longer matters … they go to Phase Three, again two thousand places.
‘Behind those buildings will be several two-storey labs and office blocks, and drug companies will be able to rent office space there. We’d have NHS researchers as well, so we need several admin blocks, each independent, rain walkways to the main wards.
‘We then want a visitors’ centre, which acts like a hotel. They have to pay – it would be cheap and subsidised, there would be rules and limits on stays, we need cleaners, there needs to be a large café.
‘Separate to that I want a large café and shop area linked by a walkway, four cafes at least, a bar upstairs, suitable shops - for staff and visitors and walking patients.
‘I then want a guest centre, guest medics, nice small apartments, say twenty, and close by. If we invited an expert from America we’d pay for his room.
‘We’ll need a morgue, and a chapel, the funeral incinerator we’re building can be used if necessary. Talk to our medics here, find a cancer expert, and then plan what’s needed beyond what I just said. Visit a cancer ward and have a look, visit a cancer hospice and have a look, get some ideas.
‘But I would guess that our standard Phase Two and Three style apartments would suit. And I want all the buildings linked, no walking building-to-building in the rain.’
My architect asked, ‘And if the parents of kids want a long-stay place close by?’
‘Apartments within the site are fine by me, build a few, a modest rent.’
‘Apartments for staff?’ he asked.
‘The council here is interested in many satellite housing estates outside the city, so we’d position one close by, two hundred houses and many apartments, some managed by us for families. So there’ll be an overlap.’
He made a note. ‘Traffic?’
‘A few hundred cars a day in and out, plus staff cars, plus the quick-test blood centre, which I hope gets thousands of people a month.’
