Blackfriar: Gleeson is championing affordable housing in the North

Gleesons sites can have a significant beneficial effect on the surrounding area
Gleesons sites can have a significant beneficial effect on the surrounding area
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House prices in urban regeneration housebuilder MJ Gleeson’s target areas are more or less the same as they were in 2007, in spite of mortgage rates having fallen from 6 per cent to 2 per cent over the past 12 years.

The affordability issues of the UK housing market are limited to London and the South East, an area which is now suffering a steep fall in prices after bloated growth over the past decade.

Now, Gleeson has appointed Lazard to review options for its Strategic Land division. It could make sense to sell it as the division is a land promotion business that enhances the value of land by securing mainly residential planning consents, predominantly in the South of England.

Gleeson’s area of strength is the North.

The Sheffield-based group appeals to low income households who are keen to buy their own property. With an average selling price of just £125,000, Gleeson makes the dream of home ownership a reality.

Gleeson specialises in building on land that no-one else wants to buy and turning it into a desirable area.

Its goal is to transform former pit villages and other deprived areas in the North into homes that local people can afford to buy.

Analyst Charlie Campbell at Liberum said Gleeson has strong cash flow profile, very limited competition in its niche market, and good affordability in its target markets.

Gleeson has reported terrific growth over the past few years and no sign of any Brexit jitters as predominantly low earners use its services to get on the housing ladder.

For much of the construction industry, 2019 has got off to a wretched start.

The modest growth in residential building has been more than cancelled out by contractions in commercial and infrastructure work.

Output in the construction sector contracted in February to its lowest level in almost a year as Brexit anxiety continued to weigh on firms as they delayed making decisions on building projects.

The IHS Markit/CIPS UK Construction purchasing managers’ index (PMI) fell to 49.5 in February from 50.6 the previous month.

This missed economists’ expectations of 50.5. A reading below 50 indicates contraction.

The March figures, due out this morning, are expected to show a further contraction.

IHS Markit said uncertainty related to Britain’s impending departure from the European Union slowed decision making on commercial projects, which led to subdued demand, while a general drop in confidence in the housing market halted residential building projects.

However, Britain’s army of smaller scale residential developers such as Gleeson are providing one of the few bright spots.

The group’s chief executive Jolyon Harrison believes that Gleeson is empowering people, giving them the chance to own their own home after years of being dependent on the council.

Some 80 per cent of the houses it sells are sold to council house tenants, which means the council houses can be occupied by people who are struggling to find a roof over their heads.

Gleeson’s sites can have a significant beneficial effect on the surrounding area, with its home city of Sheffield being a prime example of this process.