Hot Property Business Boomers

It's boom time for Britain's house builders.

They've bounced back from recession

and their profits are up by as much as 160%.

What we're seeing now is a real urgency to move.

People are going, "Well, if I don't move now

"then, actually,, house prices will go up."

New homes are hot property.

But this is an industry like no other

and house builders have to cope with a mass of contradictions.

To customers, they're selling a dream...

That home is critically important to you and it's aspirational,

you want to be proud of it.

To others, this business is a source of division and distrust.

The houses that are being planned for these green fields

are not going to be affordable houses.

This is an industry that's often trying to sell us

a perfect vision of the past.

We designed a sort of classic 18th century manor house.

But what they're producing doesn't always stand the test of time.

These buildings are going to be here possibly for 100 years,

possibly for 200 years, and they're not going to get any better.

When the house builders are booming,

there's a surge of work for tens of thousands.

We're employing more people,

we're training more people, and it brings more cash into the economy.

But it's a business that many love to hate.

It's greed, it's profit, it's our builders.

And it's one with a big responsibility -

they're not just building houses,

they're building the homes of the future.

This is a small planet, it's a small country,

and development has to take place on these sorts of sites.

We find out how house builders are improving their fortunes

by targeting the nation's prime locations...

There has been a North-South divide in terms of house-building.

..and tailoring their products to entice today's wealthiest customers.

You get a nice motion to the way a door will close,

and I think those small details are very, very important.

This is the story of how the house builders have learned

to survive and thrive while making the most essential, desirable,

but hotly debated product of all - a home.

The show home -

the sparkling shop window for Britain's house-building companies.

These businesses are selling a lot more than

just a roof over our heads.

This is, for most of us,

the most life-changing and expensive product we'll ever buy.

It doesn't matter whether you're buying

an entry level starter apartment,

particularly if it's your first home,

or if you are buying, you know,

the sort of aspirational home at the end of your working career.

That home is critically important to you and it's aspirational,

you want to be proud of it.

After the long recession,

the desire to own one of these dream homes has been reignited.

Young mum Jemma is hoping to get her foot on the property ladder

on this new estate in Wiltshire.

OK, come on through to the kitchen.

This is a lovely kitchen-diner, very large. This is our Calne show home.

For Jemma, buying a new home means

she can ensure everything is just so.

If you were buy an older property,

you kind of make do with what's there,

or you've got to plan in costs to upgrade

if you wanted to do bathroom or anything,

but to buy a new-build, to be able to design your kitchen and bathroom

as soon as you move in, they've just got so much to offer.

It's a blank canvas you can design yourself

and that's just really appealing.

Sales advisor Michelle is the friendly face of

one of Britain's biggest house builders, Persimmon.

We've got a lovely product here. It's nice to show it off.

You can see the excitement in their faces,

literally, when we open the front door.

It's selling them their dream.

It is a major, major purchase. It's exciting, I love it.

-We can paint it pink for her.

-Yes, very nice.

-OK?

Michelle and her colleagues helped Persimmon sell more than

11,000 homes last year,

generating profits of more than £300 million.

Persimmon is focused on the family market

so effectively, we're building homes

through the range of two-bedroom houses right up to five-bedroom.

Our average selling price is 180,000 in 2013,

so, you know, that gives you an idea

of where we are in the market

and we're certainly fair and squarely in that family home

for the man on the street to buy.

Persimmon isn't the only house builder

making a mint from bricks and mortar.

Over the last year, Barratt Homes

have seen their profits soar by 160%.

I think what we're seeing now is a real urgency to move.

People are going, "Well, if I don't move now, then actually

"house prices will go up."

And so, there's a real urgency come in to it

and certainly on, on good, well located sites,

we're seeing very, very strong levels of demand

and those are the sites where, you know,

we're struggling to keep up from a construction point of view.

With the house builders constructing homes

at the fastest rate for a decade,

the heat is on for the companies

producing the raw materials of the trade.

All the bricks that are made at Claughton

are all house builder bricks.

We bring the material down from our old quarry

which is about one and a half miles.

That clay is then blended with a fire clay to make this product.

Here at the Claughton Manor brick factory in Lancashire,

they're producing bricks for new homes all across the UK.

The tunnel kiln stretches about 110m long.

There would be about 300,000 bricks in the kiln.

We have a spy hole here where you can actually monitor the heat in the kiln.

We're looking at about 1,025 degrees there.

This factory is currently producing enough bricks

to build 100 three-bed semis a week.

But four years ago, the place looked very different.

In March 2010, it was then announced that the factory would be

mothballed because there was no let up with the recession.

We made 28 people redundant here.

It was quite devastating times.

With 24 million unsold bricks in the yard,

Graham was left in charge of the abandoned brickworks.

It was a bit eerie at times, really,

when it was only two or three on site.

We're used to quite a warm environment in this factory.

It was cold, damp.

It was not very pleasant, really.

The changing fortunes of this factory reflect an important fact -

house-building refreshes parts of the economy

other industries can't reach.

House-building, on a year-by-year basis,

is a relatively small part of national income.

But where house-building is important

is it stimulates a lot of other demand

which helps gets the economy moving and that's what we're seeing now.

House-building may have a positive effect on the economy,

but it's also a business that generates conflict and controversy -

from the price of the products, to where they're built

and how they're designed.

To understand some of the fiercest rows of today,

you have to delve into the industry's biggest ever boom.

The 1930s was a time of economic hardship

but it was also the era that gave birth to the modern house builder.

Over the course of the decade, nearly two million homes were built

by private companies - a record that has never been matched.

NEWSREEL: 'It is possible to see for yourselves

'houses in every phase of construction.'

The '30s grabs people's attention because

so much was built at that time,

we're looking at 200,000, 300,000 homes a year.

But what was particular about it was so many of them

were privately built, and that's what's probably so special about it.

The demand for new homes was born out of the Depression.

To encourage economic growth,

interest rates were cut to almost zero.

That meant it was cheaper to borrow money,

making home-ownership more attainable than ever before.

The 1930s is a really interesting period for home-ownership.

It's really when home-ownership takes off

for ordinary people in Britain.

It's the most affordable time to buy a house in history,

partly because of the supply of houses

and also to do with availability of finance.

In the mid-1930s, houses are cheaper relative to wages than we see today.

We're talking about an ability to buy a new house for £600.

Average earnings might have been £170.

Big companies like George Wimpey were expanding the suburbs -

but many of the new homes were built by small, local firms,

including Bradley and Arthur, based in Ewell in Surrey.

This is a photograph taken, we think about 1935,

of a house when being constructed,

and my father is one of the four standing outside.

The house is pretty well identical today as it was then.

That can be seen.

Michael and John Arthur still live in Ewell,

where their father, William, built hundreds of houses in the 1930s -

homes that remain highly sought after today.

They were family houses and they were sold, I think,

for about £1,100 in those days.

They were always houses on very generous plots -

about seven to ten to the acre -

and a great deal of attention was given to the exterior appearance.

You can see the Tudor-style design

and good quality facing brickwork, good roof tiles,

very often handmade clay tiles.

It's a tribute to our father and his company and his workers

that it was built with good quality.

Two important factors allowed house builders

like Bradley and Arthur to grow their businesses -

cheap, plentiful land

and an almost complete absence of planning regulation.

What that meant, I think,

was when economic circumstances became more propitious,

a property developer could respond very quickly

and there's no delay in getting consent for building.

Land can be bought up and quite quickly built upon.

The building bonanza wasn't all good news for the house builders.

A huge increase in the supply of new homes

had a big impact on their price.

By the end of the 1930s, after so much building,

you actually saw a fall in house prices over the period,

and quite a significant one.

This illustrates an important fact,

which is that if you build lots of houses,

lo and behold, house prices fall.

You get better quality housing much cheaper

and it's a classic supply-and-demand thing.

These houses were a boon for aspiring home-owners.

But for others, they were blighting our green and pleasant land.

NEWSREEL: 'We have allowed uncontrolled ribbon development,

'housing estates and factories have sprung up all along the main roads

'and railways, leading outwards from the city,

'reaching far into what could have remained open fields and woodlands.'

Tough, new planning laws were introduced

to halt the march of the house builders.

From now on, they would need the consent of

the local planning department for every new home they built.

There's no other industry that has to ask the government

every time it wants to produce one of its products, "Can I do it?"

But that's what house-building does and that's, of course,

applying for planning permission.

Planning permission takes a long time, it's highly uncertain

whether you'll get the planning permission and when you'll get it.

Another obstacle to the burgeoning building industry arrived with

new protections for countryside around the big towns and cities -

the green belt.

Finding land would now be fraught with risk and controversy -

a burden that still weighs heavily on the house builders of today.

Here in Gloucestershire,

the battle lines are drawn between the house builders and the public.

With a growing population, local councils say 30,000 new homes

are needed over the next 15 years.

But local residents have a long list of concerns.

The houses that are being planned for these green fields

are not going to be affordable houses,

they're going to be three- and four-bedroom detached houses

-for families.

-Where's all the doctors surgeries? The A&E?

The gas? The electric? The water?

If you're going to build all these houses,

where's all this coming from?

We're not saying that we want the houses built somewhere else.

We're saying that we want the numbers looked at

and to see if this is absolutely necessary.

One local who's worried about new homes is Christine Ball-Hornblow.

She lives in the outskirts of Cheltenham,

next to an area of open fields and allotments.

A group of builders are seeking planning permission to build

hundreds of new houses just metres from her back garden.

On this map, this is our house, here,

and this, here, is the field

in which you can see where we're stood now.

This, here, all this dark brown area,

is the high-density housing.

This is a mammoth amount of properties

which really, the whole area is going to cause flooding,

problems with noise pollution, problems with cars, et cetera.

Up and down the country, there are worries that new homes

will place a strain on local roads and schools.

Christine and Rod also want to preserve their open fields.

You know, it's just something lovely to have at your doorstep,

and it is at your doorstep.

You know, when it's gone, it's gone. It'll never come back.

There's another group of local residents

who will also have to make way for the proposed housing development.

They're very happy pigs, we're very happy people to see them,

and it will soon be, if the developers get their way,

nothing but urban sprawl

and it will be a sad day.

The house builders are caught between a rock, a hard place,

and their basic need to get on with making money.

We have a dilemma in this country that everybody,

I think, recognises that there is a need for more housing

but really nobody wants new houses built next to them.

So it is really about dealing with that,

understanding what the requirements are for that local area,

and dealing with it in the most sensitive way.

To make the most from any land they've secured,

house builders need to avoid getting embroiled in expensive

and protracted disputes with the public.

Badger Building is a small company based in Lowestoft.

One site they've been trying to build on

is this former boat yard overlooking the Suffolk Broads.

They were convinced it was a prime spot for a scheme of 160 new homes.

The original plan proposed a six- and seven-storey property

around the water's edge.

It was developed at a time when waterfront development

around Poole Harbour, in London, in places like Brightlingsea,

and along the South Coast was very popular,

and it took its design cue, I suppose, from that.

Confident they would gain planning permission,

Badger paid around £3 million for the site.

But then the locals got wind of the scheme.

We were fairly horrified,

because it was going to be seven storeys high and very dense.

The height of the buildings would have been

completely out of keeping with the ethos of the Broads.

It would have been very unsympathetic.

The whole thing would've been Marbella on the Broads

which would have been ridiculous.

Ian and Penny joined a campaign against Badger's plans.

Not so much a case of "not in my back yard"

as "not in my boat yard."

We are certainly not NIMBYs because

what we want more than anything else is for the site to be developed.

Ever since the boat yard closed,

it's been a very attractive place for vandals.

We've had fires over there set by young lads.

We've had the police called for goodness knows what else.

It's just been pretty much a nightmare.

The planners rejected the scheme,

forcing Badger to go back to the drawing board.

The local people were very uncomfortable with the first plan.

Not only in the scale of the development and the height of it,

but the amount of traffic that it would generate,

and just the very urban nature of it.

After eight years of consultations,

Badger has finally been granted permission for 76 homes -

less than half the number in the original plan.

Placating the public has been a bruising and expensive experience.

People are very frightened of the unknown.

People need to get their objections in perspective,

and in the context of the life that we lead,

the houses that we need to build for people.

This is a small planet, it's a small country,

and development has to take place on these sorts of sites.

For the house builders,

planning conflicts all add to the cost of acquiring land,

making it one of the most expensive elements of the whole business.

So, how much does land account for

in the cost of a creating a new home?

For a three bedroom house priced at £200,000,

land costs around £50,000. Quarter of the total price.

In some parts of the country,

land accounts for up to half of the total price.

I think often people would be surprised at how expensive land is

and it's certainly true that if you look at the data so far as we have data,

land prices for housing construction in the UK particularly

have risen incredibly sharply over the last 30 or 40 years.

Battles with planners and the public mean that land is a scarce commodity

and that has a big impact on the price of new homes.

A requirement to get approval

through the planning system for any new development,

that's obviously a highly controversial process

and so planning has a big impact on the supply of land.

And most housing experts, um,

including myself would argue in fact, um,

the restraints of the planning system

are one of the main reasons why we have high house prices in the UK.

It only trickles land through

in situations where people would like a lot more.

There is one kind of land

where house builders have found it easier to gain planning permission.

That's brownfield, or previously built-on land.

But even here, trouble lies in wait for the unsuspecting builder.

Here in Kent, work has started on a development of 37 new homes.

It belongs to Millwood Designer Homes,

a local firm that specialises in bespoke, executive houses.

'We have a mixture of homes here.'

Prices are going to run from around 300,000-ish thousand

up to about 1.2, 1.5 million.

So, we're covering a big spectrum in those price ranges.

This spot looks pretty rural,

but it once housed a large centre for agricultural research.

'This is a previously developed site, or land

'and what that basically means is it was covered in buildings,'

because the buildings were redundant,

no longer used, not for 20-odd years by the research centre.

And not only covered in buildings,

but covered in masses of concrete. Hard standing.

Brownfield sites like these

are notorious for throwing up unwelcome surprises.

'On site today now we've found we have more concrete to remove...'

Underneath the concrete hard standings that we thought we were breaking up,

we found more and more layers,

so we're ending up with something like

three times more demolition material

than we ever thought we were going to have at the beginning.

It's not just the concrete that's causing a headache.

There's more trouble lurking below the surface.

'We've had some mercury on this site.'

We had been told there was mercury,

but it turned out there was a great deal more than we thought.

It had percolated into some of the ground areas,

so that was a major contamination issue.

After clearing up all the pollution,

the next task is recycling the tonnes of concrete they've uncovered.

And that means hiring in a ten-tonne piece of equipment,

'the Crusher.'

The challenges of building on sites like these

all add to the house builders' time and costs.

'What I can tell you today is that the overall cost of this development

'is something in excess of 14 million.'

The land element was probably something over three million,

but as you can see here the problems are many, many fold.

So, it would be much easier to move onto a nice,

flat piece of land, set out our foundations and dig.

Here we've got probably four months', five months' work

before we can even think about building houses.

For the house builders, finding land may be difficult and divisive,

but they also have to grapple with an issue

that's an even hotter potato...

Making a product that will become part of the British landscape.

For Millwood Designer Homes,

the next step after finding land is to design their developments

and for them, appearances are crucial to success.

We build the houses, not to look at, we build them to sell

and to appeal.

And you can't sell rows and rows of houses all the same very easily.

You need to have something that's going to appeal

to all of the people that want to come and look at it.

The company is particularly proud of the designs

for its Orchard Gate development in the Kent countryside.

'At Orchard Gate, we've got prices ranging from 300-odd thousand

'up to a million.'

Every single one of those, I think will appeal to the people

in that price bracket.

And every single one of those will enhance each other,

so the £300,000 houses will actually enhance

the position of the £1 million houses,

because it's integrated, it's thought about

and it actually is designed to appeal to markets.

The brief for John's in-house design team

was to create a style to complement the rustic location

and appeal to well-heeled buyers in search of something special.

We had to come up with a means of designing

something which was organic in its location

and something that had grown up over years rather than being, sort of,

dropped in to the middle of the countryside as a modern housing estate.

The result was a village designed

to look as if it's evolved over the centuries,

with an imposing Georgian-style residence in prime position.

So, we designed a sort of classic 18th-century manor house,

which sat in the far end of the site, linked by a long lane,

down to a pond, and beside the pond would be some workers' cottages,

working with the orchards and the agricultural land around.

And that's how the initial concept started.

Bringing this vintage village to life

means selecting the right building materials.

So we would use, on a number of these properties,

reclaimed brick, and also reclaimed tiles as well,

which gives an instant, aged feel to the scheme.

The cost of design is a major factor for a medium-sized business like Millwood.

For the big, high volume house builders,

design costs are often kept to a minimum,

and that's something that's created a bit of an image problem.

Clive Aslet is editor of Country Life magazine.

He's spent years looking round some of Britain's finest

and most stately homes,

and he's not too keen on some of their modern counterparts.

What do I think about these new homes?

I have to say, my heart usually sinks whenever I see them.

I've been following this for 30 or 40 years.

We don't seem to have got any better.

We've lost the knack of creating beautiful urban spaces.

Clive has come to Slough, to a typical, modern housing development.

The first thing he notices is the vast expanse of brick.

Windows are expensive, and so you get an awful lot of wall

in these developments, and you can see

this great, blank, brick wall there.

There, they've had the idea of putting a window in.

But it's a very small window.

Looks pretty weird, but glass is expensive.

There are some aesthetic flourishes here, but Clive's not convinced.

No architect has been near the houses that we're looking at today,

and you can see that because there are all these little details

which have been thrown at the buildings to, I suppose, increase the value.

But they've all been done wrong.

If you look at the porch, for example, well, that is

very uncomfortable because porches like that aren't meant to be.

It's got three columns.

Georgian architects and classical architects never designed porches with three columns,

because the middle is where you expect to go in.

I think what you see in these developments is buildings

which are undifferentiated, and which go on and on for ever,

which could be anywhere, which are built from materials,

mass produced, used all over the country.

They're the equivalent of the old supermarket motto,

"pile 'em high and sell 'em cheap,"

except it doesn't matter with a can of beans,

but these buildings are going to be here possibly for 100 years,

possibly for 200 years, and they're not going to get any better.

Here in Cambridge, one house builder is keen to stress

they're shedding the bland, box-like image that bedevils the industry.

Certainly in the past,

when there was a real push for volume, I think there was

a uniformity to the way houses were built, and housing developments.

Lots of straight roads, lots of similar house types in a row.

Actually, what we found is that breaking that up,

different materials, different finishes, cul-de-sacs,

you know, roads that turn rather than are straight,

anything that breaks up the sort of the standard look

creates a much nicer environment for those living here.

For Barratt, making their homes easier on the eye

means upgrading the details.

One of things that we've done here is to really focus on the detail,

so for example, if you look at the brickwork,

that is quite unusual. It's a Flemish bond brickwork,

so there's some heritage included in this building.

So, focus on the detail is very important,

certainly when you're delivering houses that are more contemporary,

because they often lose some of that detail,

so what we're trying to do is add it back in to the house.

Four-bedroom houses here cost more than £550,000.

Better design and higher spec materials are helping clinch sales

to customers who can afford to be choosy.

You can see the colours on the roofs,

the materials we use from original slate to reconstituted slate,

to more conventional tiles.

What we're trying to do is make sure that these houses look good

in 10, 15, 20 years' time.

But there's a lot more to maximising sales than getting the design looking good.

The house builders need to make a product

that reflects our changing lifestyles.

Getting to grips with that challenge all began 40 years ago.

The 1960s were a time of growing consumer aspiration

and self-expression.

One house builder realised he could boost sales

by treating customers as distinct segments of the market,

and tailoring his products to the individual.

Lawrie Barratt was an accountant from Newcastle.

The first outpost of his building empire was the home

he built for himself.

From this modest start, he would go on to revolutionise the industry.

I think that Lawrie recognised you've got to have

a marketing-based business that recognises what people want

in terms of a home, or different styles and types and sizes of homes.

And you've got to get on and build the houses that people want.

The building industry historically has been production-orientated.

Building what the builder thinks people want,

whether they can afford it or not.

Our whole philosophy is majored on sales and marketing,

in offering a total service, a total package.

Barratt's genius was to understand house buyers as consumers

and engineer his product to suit them.

This led him to invent a new kind of home,

designed specifically for young singles.

He came up with something called the studio solo.

It was massively successful,

because you could have a completely contained home,

a little one-bedroom that doubled as a kitchen,

because the bed folded back into the wall and had a kitchenette

and it had a separate loo. So he found that the market existed

and produced a product that fitted the bill perfectly.

For those already on the property ladder, Barratt used a tactic

usually associated with car dealers -

the part-exchange deal.

If somebody's got a house and they want to move up into a bigger,

more expensive house, then they say "Oh, we can't afford it,"

you say, "Well, yes, you can afford it

"because we'll take your old home off you

"and you pay the difference," and that is something that's become

a lynch pin of the house-building industry, the part-exchange system.

Soon, Barratt was selling a house for every type of customer.

His penchant for travelling by helicopter inspired

the industry's first nationwide television ad campaign.

No-one makes house buying as easy as Barratt.

No-one gives you so many purchase plans.

All over Britain, Barratt help more people buy houses

than any other builder.

For singles, the retired, young couples and growing families.

Barratt - building houses to make homes in.

You may remember those television ads with a helicopter

whirling round. He got people interested in the concept

of buying their own home.

I would give him complete recognition for the way in which

he built up his company and therefore the industry.

Barratt had transformed the house-building world,

and his homes were becoming symbols of a changing society.

For my parents, when they bought their Barratt home,

it was a real move up in the world.

The Barratt house was absolutely where they wanted to be.

My dad had grown up in a council house, my mum had grown up

in Air Force accommodation, so to kind of be home-owners,

and we moved to a four-bedroomed house,

one of the executive houses on an estate.

You know, this was the kind of pinnacle of achievement,

to be on the biggest, most exclusive house of the estate.

The kitchen was quite modern,

sort of Formica cupboards with metal trim,

which my parents had been able to choose.

Because it was a new house,

they chose quite a lot of the fixtures and fittings.

The whole house was painted magnolia,

which was sort of a standard builders' thing,

and we had dark green carpet, and they chose

an avocado bathroom suite.

You know, the height of chic and sophistication.

During the 1980s, owning your own home was no longer

just an aspiration - it was upgraded to a fundamental right.

The great political reform of the last century

was to enable more and more people to have a vote.

Now, the great Tory reform of this century is to enable

more and more people to own property.

Prime Minister Margaret Thatcher encouraged home-ownership

by giving tenants the right to buy their council properties.

Mrs Parker applied to buy their house

because they liked it very much.

This policy tapped into many people's desire to show how

they were shaking off the uniformity of council housing

and moving up in the world.

When right to buy comes along, one of the first things

that people often do is replace their front door.

So you'll have the kind of flush post-war door

replaced with the mock Georgian door or the Victorian door,

maybe the adding on of some Doric pillars,

if you have huge aspirations, but I think those issues

are very interesting around identity and self-expression.

By the late '80s, a million publicly owned properties had been sold off,

and the Government decided to withdraw from building new homes.

From now on, that responsibility would be left largely

to the private sector.

With house prices more than doubling during the decade,

these were golden years for companies like Persimmon.

I suppose that the moment when we felt that we were

really getting somewhere was in '85.

We'd been going for about 12 years

and the business had reached sufficient size and scope

to enable us to go public on the London Stock Exchange.

And I think that was a great moment in the history

of Persimmon as a business.

Lawrie Barratt was knighted, but the ultimate seal of approval

came from the Prime Minister, who bought a Barratt Home of her own.

Clearly the estate's Neo-Georgian charm prevailed over

the PM's usual taste for things Victorian.

But rising property prices were fuelling inflation,

forcing the Government to raise interest rates to nearly 15%.

As mortgage repayments rocketed, the '80s boom turned to bust.

In the recession that followed,

thousands of house builders went to the wall.

It was a painful reminder that over confidence can lead to disaster.

The most important thing in house-building is to watch

the market like a hawk.

And when the market is going down,

that's when you've got to be very careful

and you've got to stop investing in new land.

And you've got to make sure that you are only building the houses

that you have got sales on.

And that's a very important part of running your business.

Today, the house builders are enjoying another boom.

This is a business where success depends on investing

in exactly the right location.

Even in the pricy south-east of England, house builders

are refining methods of extracting the maximum profit from every site.

This development in Moreton-in-Marsh in the Cotswolds

belongs to CALA Homes.

They pride themselves on being the most expensive

national house builder.

That means they only build where there are lots of wealthy buyers,

which is why they've homed in on this area.

The Cotswolds is an absolute sweet spot for us in terms of market.

Those people who know this part of the world will know

that there is a lot of inward migration from affluent parts

of the market, so a lot of affluent family homes are being built here.

Before they've bought the land,

the company carries out reconnaissance on the location,

studying their potential customers in forensic detail.

The first thing we will do, is to send our teams into that

market place, and find out who are the people that already live here?

What income brackets are they in? Where are the best schools?

We will build up a picture of the sort of people

that will live on that site.

CALA also hire the services

of specialist market research companies.

This one uses detailed consumer data to produce demographic "heat maps".

What we've got here is a map of the surrounding area

of Moreton-in-Marsh, it's about a five-mile radius all the way around.

You've got two dominant colours here.

The darker blue, we call "Lavish Lifestyles".

Lavish Lifestyles are wealthy, suburban type neighbourhoods,

with families.

And then the lighter blue, these areas here, here, and here,

all in very close proximity to Moreton-in-Marsh,

those areas are dominated by what we call "Mature Money".

Mature Money are the older, empty-nester-type neighbourhoods.

These people are older families, whose children have grown up,

and have likely flown the nest.

So, any development in Moreton-in-Marsh

is likely to be attractive to these, as they downsize.

If you can attract the empty nesters who've got a lot

of equity in their property, then building something

which suits them is probably a very good idea.

Having done their research, CALA targeted two key markets -

affluent families and the empty nesters.

That meant creating two separate show homes.

One is aimed at the families. For them, an open plan

kitchen/diner is essential, along with upmarket fittings.

The clunk test on a good car door is something we try to achieve

in our properties. We have typically German-engineered kitchens

and you get a nice motion to the way the door will close,

and I think those small details are very important.

The second show home has been created for the empty nesters.

Here, it's less Vorsprung Durch Technik, more Come Dine with Me.

So empty nesters, they like a formal dining room,

they like somewhere where they can bring their empty-nester friends,

and have formal dinner parties.

But as you can see, it is also traditionally designed,

from an interior design point of view,

with more traditional colours and styles and doors.

CALA were swamped by interest from even more

empty nesters than anticipated but the four-bedroom family houses

didn't quite suit their requirements.

We very often find the empty nester

demands a larger house with fewer rooms.

Typically, they've had children, they've gone through a life

where they've accrued lots of furniture, sizeable furniture,

lots of clothes, and they want space to store those things.

The empty-nester house has large rooms but less of them.

But it only takes a few swift alterations

for a four-bedroom family house to be reborn

as a three-bed empty-nester home.

We sought a separate configuration which involved the removal

of this wall, the merging of these two bedrooms into one,

placing a new doorway across here,

so fairly minimal construction changes

but it offered a completely different market sector.

Wealthy empty nesters may be flocking here,

but with three-bedroom houses costing around £400,000,

many others are priced out of this corner of the Cotswolds.

In the south east of England, first-time buyers now face

house prices more than five times their annual salary

and property panic stories are rarely off the front pages.

Spiralling prices have added even more political controversy to the mix.

And for every bubble, there's a politician weighing in

with a scheme to reshape the house-building industry.

The gap between those who own a home and those who want one is widening.

It's our job to help those first-time buyers

who are unfairly priced out of the market

Ten years ago, Deputy Prime Minister John Prescott was on a mission.

Since entering office in 1997, he'd seen house prices more than double,

and he wanted more affordable homes to be built.

Well, I think it's always been an important priority,

it should be for any government.

You know, in the '50s, we were building 300,000,

and we came down to 200,00, then it's down to 100,000,

so there always was a desperate need.

Prescott decided to invite the big house-building companies

to a series of meetings.

He soon realised this was an industry that would resist change.

It took me two dinners. In the second dinner,

I realised these guys worked together.

They're sitting in their tables away from me and saying,

"Well, we've got to try and look as if we're doing something,

"but we know it's going to be less profitable

"and do we want a guy like him on our backs?"

Prescott decided the way to get them to build affordable homes

was to launch a competition,

challenging the builders to develop ways of constructing

a family house for £60,000.

The best of the designs were chosen for a series of pilot schemes,

to be built on Government-owned land.

This one, near Milton Keynes, was built by George Wimpey.

We took part in it because we felt we had something to learn

from looking at new build methodologies, and because

we wanted to sort of interact with Government around their views

on how the industry should develop, and we thought we should

learn from that and also maybe help them to learn as well.

These houses were built from factory-made components

and designed for speedy assembly.

To make his £60,000 homes cheaper, Prescott's idea

was that the cost of land wouldn't be included in the final price.

Future buyers would only pay for the construction costs,

while the land remained in Government hands.

I own the land, you pay the construction cost.

Once you want to move on, I'll give you the share in the increase

in value based on your construction costs, and I would keep the land.

Over 100 of these hi tech homes were built in Milton Keynes,

and now Lord Prescott is going to see them for himself.

It's certainly different.

It's the first time I've been to this site. There was a lot

of discussion about it, so I was very interested to see

how it had turned out. First impressions seem pretty good.

My concern was to get affordable houses.

Whether they've remained affordable given our market

is a question I want to talk about.

-Hello.

-Hi, can I come in? How are you, Lucy. All right, Jonathan.

So are you going to show me this, I've never seen it,

talked a lot about it.

This four-bedroom house was bought in 2008 by Jonathan and Lucy,

who are both architects.

First stop on the tour is the upstairs living room.

Blimey, plenty of light.

You've got the view at the end of the road.

And when the trees come out here, you get the trees as well.

I think what strikes you most, and it's emphasised by the colours

-and the design is light.

-Light.

-Exactly.

50% of the external is glass.

These modern houses may be light and airy,

but Lord Prescott wants to know if they're practical, too.

Does it get coloured at all by weather conditions?

They are white, at the end of the day,

so you've got to clean them.

But you can see the ones there, one's been cleaned.

Oh, yes, you can see.

The maintenance is pretty easy.

It's literally just a guy with a mop from the floor.

You can see, it's quite striking, isn't it?

Lord Prescott is impressed, but the £60,000 question remains.

How much did Lucy and Jonathan's home actually cost?

What did you have to pay for it?

In the end, after negotiations and the package discussed,

we paid in the region of £300,000.

300,000?

That's five times, even if you don't allow for the land.

Frankly, it just defeats what I'm trying to do, which is at least

to provide for some people a house that is within their means,

to have a choice to live here.

For Lord Prescott, discovering what Lucy and Jonathan

paid for their home has been a big surprise.

But he thinks he knows who's to blame.

Now, I've just discovered what really went on is that they built

these 60,000 houses to a certain extent, some of them,

and then sold them onto the market, at a market price.

Now, that totally defeats what I'm trying to do.

It's greed, it's profit, it's our builders.

The company that built these homes say their final price

wasn't all about profit - there was another factor.

Lord Prescott's plan to remove the cost of land remained a pipe dream.

In fact, Wimpey bought the land from the Government,

and then included this in the final price.

Those houses were not sold for £60,000

and they weren't ever anticipated to be. The £60,000 was about

the construction cost, but then when you add in the cost of the land

and the infrastructure and everything else then, yeah,

it was never going to be sort of providing a home for £60,000.

The house builder argues it's impossible to build cheaper homes

without factoring in the cost of land.

John Prescott's challenge was for the industry to build homes,

you know at a cost of £60,000.

What I don't think he ever understood,

and it changed a little bit over time,

was that actually so much of the cost of a home is in land

and infrastructure, that actually the construction cost

of a home itself is not the biggest element of the challenge.

So, in some ways that focus was never quite in the right place.

In fact, the cost of constructing a new home, from materials to labour,

is about 25% of the final price.

That's around £50,000 on a £200,000.

On larger developments, another big cost is local amenities,

like affordable housing.

This can account for another 25% of the price of a new house.

You know, we'll do everything from building schools to providing

free land for affordable housing

or for, you know, other community facilities.

Changing a major A-road junction and those sorts of things.

So, actually those elements, which in a way are social gain

for the wider community, actually can be greater than the cost

of physically building the infrastructure of the house itself.

After factoring in all the costs,

from design to land and construction,

there's one big area left - profit.

That's a healthy 15%, or £30,000 on a house costing £200,000.

House-building is very profitable because of the scarcity of land,

the risk you're taking with capital.

What you have to do is aim for a 20% return in the good times,

so you're making more than nothing in the bad times,

and over the cycle you're making a decent return

to compensate shareholders for the risks you're taking.

House builders' profits may protect them when things go bad,

but for many of them, that still wasn't enough

to survive the seismic shock of the last time boom turned to bust.

World share prices have tumbled,

the dollar and the pound have fallen.

The global credit crunch is now a credit crisis.

When the world financial crisis came along, and that completely

froze the opportunity for people to raise mortgages,

and made buyers very worried about buying a new house anyway,

demand absolutely shrank for house builders very, very rapidly.

We lost about 40% of our sales

pretty much overnight, within a few months,

so our turnover fell by 40%.

It was the First World War in terms of the scale of losses.

Huge amounts of capacity were lost and lots of people were laid off,

and firms shrunk very, very dramatically in size.

In the darkest days, I went back to not being able to sleep.

It terrified me, all the years of effort, energy, risk and so on

and so forth, to say nothing of all the staff, most of whom we'd had

for at least ten years here. I could see the company

going down the tubes, as they say, at that point.

At the peak of the boom in the noughties,

the big house builders had borrowed heavily to buy land,

but with sales plummeting, they were unable to pay their debts.

Through most of that period, we were confident that we could

refinance the business. I mean, that was about a £2 billion refinancing,

incredibly difficult and complex at that point in time.

There were probably two points,

two weekends when you really did look yourself in the mirror

and say, "Are we really going to get through this?"

In the depths of the recession, the house builders tried desperately

to shift their unsold stock of homes.

The way house builders survive of course is they stop buying land,

they stop building homes and they focus everything on selling

the product that's coming through the pipeline.

But with the banks reluctant to lend, buyers were in short supply.

After five years of sluggish sales, the government intervened,

providing £3 billions' worth of state loans to boost

the sales of new homes.

From the beginning of next month,

we will offer an equity loan worth up to 20% of the value of

a new-build home to anyone looking to move up the housing ladder.

It was a very big headline because it was part of the budget,

and the home-buying public realised from this that actually,

it was affordable to buy a new house.

I think what the Chancellor did when he announced that,

was effectively release a lot of pent-up demand very quickly,

so we saw an awful lot of people. I mean, we saw in terms

of our website traffic, it doubled on the day,

and, to be honest, it's stayed very, very high ever since.

The big house builders had survived,

but thousands of smaller companies were less fortunate.

Today, the house builders are bouncing back,

but the recession has taught them

a new set of rules for boosting their sales and profits.

Number one - remember, with every boom, there will be a bust.

Always take a long-term view.

That if you get sucked into short-term decisions, you know,

particularly in our industry, when the market is strong,

then you don't protect the business for when it's weaker.

So always standing back and saying, "OK, these are the conditions now,

"what might they be in two years? In three years? In five years?"

And that's coloured a lot of the way

that we've set the business up since that period.

Lesson number two in how to get ahead in today's market -

they'll only build as many homes as they're sure they can sell.

The industry as a whole,

and certainly this company, Persimmon, are more cautious

about the rate of build, and they relate their rate of build

directly to their rate of sale.

I mean, literally on a weekly basis. If we've sold three houses

on that site that weekend, we might start building another

three houses not the next week, but, you know, quite soon thereafter.

Finally, they're very careful in choosing the locations

where they build.

I think the lessons that a lot of the house builders learned

in the downturn was that the good stuff still sold and the stuff

in more difficult markets really didn't, so going forward

there is a mindset shift towards being in places

with more desirable housing, more prime locations, if you like.

More family housing cos there is an understanding

that that still sells well even in downturns.

For big companies like Barratt, that means looking to build on sites

like this one in Cambridge, where there's a lot of demand from buyers.

For me, it's about the discipline of making sure

we invest in the right places, get the right sites,

then get the right product on those sites.

If you're buying the wrong sort of site, those are the ones

that are going to be worst affected by a downturn.

The house builders have learned new ways to prosper,

but will this deliver the homes we need in the future?

Last year, 130,000 new houses were built in the UK,

up from the record lows of the recession, but still a long way

short of the 200,000 needed to meet growing demand.

All political parties seem to want at least 200,000 houses built.

Again, that would take us back to previous cycle highs.

The industry would love that and they would love there to be enough

customers out there to build those 200,000 houses,

but they are very badly burnt from what happened in the last downturn

and they will avoid running volumes too far ahead.

You only have to look at where new homes have been built over the

last five years to see how cautious the house builders have become.

You can see the red areas across the south-west of the country,

from the South Midlands, and across the south-east. There's been quite

a lot of development there.

What this is showing is that there has been a lack of investment

in new-build in the North of England.

There is a sort of North/South divide in terms of house-building.

With house builders focusing on the prosperous parts of the country,

how will Britain get the homes we need for our growing population?

Some suggest new garden cities.

In the south-east, where the pressure is greatest,

we're going to build new homes in Barking Riverside,

regenerate Brent Cross and build the first new garden city

in almost 100 years at Ebbsfleet.

One new town that's already being promoted is Cranbrook,

one of the country's largest housing developments.

Houses range from two-bedroom apartments

up to two-, three-, four- and five-bedroom homes

with a range of material finishes locally sourced

and in keeping with the surrounding Devon environment.

This is the first phase of development, which is 1,100 houses.

It's its own stand-alone community, the first new town

built in Devon since the Middle Ages, and ultimately,

we see it as a scheme of 7,000 homes with a population of 15,000 people.

Cranbrook began more than a decade ago, when a group of house builders

realised there was a shortage of homes in this part of Devon.

We knew this area needed to grow,

and without any real conurbations,

and with only some small towns and villages,

where was it going to grow?

So we took a decision to seek to acquire land

in a strategic location.

After years of negotiation, the house builders gained permission

to build thousands of new homes on an area of farming land near Exeter.

When it's finished, Cranbrook will have its own schools,

community centre, even a railway station.

But the house builders aren't convinced new towns like this

will solve the country's housing shortage.

There may be situations where the likes of Cranbrook can be developed,

but I don't think that they are the answer to the country's problems.

I think the most sustainable places for us to build

are in our existing towns and cities and service villages.

That's where the needs are arising, that's where the viability

of the town centres need to be underpinned

with new people moving in.

And I think that's where the main play of the housing market

is going to occur over the next 20 years.

The house builders may prefer to build around the edges

of our towns and cities.

Some experts say this won't solve the huge shortage of homes.

It's time to consider radical ideas,

like colonising land in the green belt.

People often misunderstand the green belt,

they think it's protecting environmentally important land

and it isn't. It's really a planning designation.

It's about keeping urban sprawl in check.

And it's about keeping towns apart.

The UK uses green belts in a way that no other country does

and that is one of our fundamental problems.

We cannot expand our cities, people cannot have the standards of living

they could otherwise do, through the benefit of more housing

and cheaper housing, and the green belt is what stops that happening.

Ultimately, whatever the answer to Britain's housing woes,

it's clear that new homes will remain in hot demand,

and when the house builders are booming, it affects us all.

Buying a home is the most important decision that people

make financially in their lives.

It impacts on so many aspects of their lives in so many ways.

And that has a knock-on impact into our business

and how challenging that is.

Getting that right for individual customers against the constraints

of a changing economic cycle and our planning system

is always a challenge.

If we get that right, we have a great business

and we provide great products to our customers.

After all, there's no other business with such a profound impact

on our landscape and the way we live.

I am proud of the fact that over the years Persimmon has built

140,000 houses, and whether it's fancy bathrooms or nice kitchens

or whatever else, the houses that we built over the years

are so far different to what the houses were like

40 or 50 years ago.

I do feel that we have made a major contribution to the way

in which people live in this day and age.

The Open University delves further into how these businesses continue to boom.

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