LONDON (Reuters) - The British government will make it easier for developers to convert offices into apartments, the latest in a string of initiatives to kick-start economic growth through housing.
Planning minister Nick Boles is due to announce the changes to the planning system this week to help to meet the country’s huge demand for housing and revamp rundown areas where office schemes are not viable, a government source told Reuters.
“We are currently looking to make it easier to convert empty and under-used commercial space into residential use. This will provide new homes, help regenerate urban areas and boost local town centres,” a spokeswoman for the Department for Communities and Local Government said. “We will announce more details shortly.”
Sterling hovered near a 10-month low against the euro on Monday and looked vulnerable to further losses as concerns about a so-called triple-dip recession in the UK grew ahead of fourth-quarter growth data on Friday.
Other housing initiatives in the government’s battle for growth include Funding for Lending and NewBuy, both of which are unlikely to make a significant dent in the target of 240,000 new homes every year by 2016 to meet population needs, Peel Hunt analyst Robin Hardy said.
“If the planning barriers to conversion are effectively removed, this could have a significant impact,” Hardy said of the new scheme. “The whole country is littered with masses of under-occupied low-value office buildings that would make fabulous residential (property).”
Residential values are about double office values across much of the UK, making housing schemes more viable, said Mat Oakley, director of commercial research at real estate consultant Savills.
“You have to ask whether some office sites have any value at all if they are empty and unlettable,” he said. “The big question is whether developers can borrow the money to do it. It’s still speculative development.”
The price difference can reach four to five times for the best London sites. This has led to a flurry of deals by developers, including British Land and Land Securities, to meet the insatiable demand from wealthy overseas buyers looking to park their cash.
The predominance of such schemes has led to a backlash from local residents priced out of the market and the city’s best apartments are often used only a handful of times a year by buyers from Russia, Eastern Europe and the Middle East.
Editing by David Goodman