Building Pressures

Susannah Streeter: Hello and welcome to this Switch Your Money On podcast from Hargreaves Lansdown. I'm Susannah Streeter, I'm the senior investment and markets analyst here at Hargreaves Lansdown and, as usual, I'm with Sarah Coles, our senior personal finance analyst. And, Sarah, it's certainly been a torrid few weeks on the finance front, hasn't it, in the aftermath of the so-called mini-budget?

Sarah Coles: Yes, it's been really turbulent and the movements of-, well, they've been keeping us on our toes, haven't they? And keeping up with it, we've been really up through the early hours and beyond.

Susannah Streeter: Yes, unless you were living under a rock or asleep for most of the past week or so, you'll know that the pound slid to an all-time low against the dollar, amid worries about the direction of government economic policy. Sterling dipped to levels not registered since Britain switched the currency to a decimal system in 1971. These are the steepest tax cuts in five decades and there's nervousness, because it means the government will have to borrow vast sums from international lenders, despite the tweaking that we've had most recently.

Sarah Coles: Yes, and the worry is that policies could make the inflation headache even worse, because it increases the cost of imports that are priced in dollars, like petrol and food ingredients, including my own personal favourite, the banana. But it also increases the cost of things like industrial components and electronic devices and it's also likely it's going to mean the Bank of England's going to be forced to raise interest rates more steeply in order to try and push inflation back closer to its target of 2%. So the cost of borrowing for businesses and consumers will rise. There are now expectations in financial markets that the interest rate could reach about 5.5% by the middle of next year, which would effectively cancel out any boost in the housing market from the stamp duty cuts which were also announced in the mini-budget.

Susannah Streeter: What does all of this mean for house prices and the housing market in general and for house builders? Well, this is what we're going to be looking at in this episode, which we've called Building Pressures. We'll be taking a deep-dive into what's happening in the market with Adam Pitt, a senior quantity surveyor from house developers Stephens and Stephens, who build properties in Cornwall. And so, Adam, you build a mixture of first homes, second homes and holiday lets, I imagine there's a lot of uncertainty around right now.

Adam Pitt: Yes, very much so. Feels very strange, I would say, sort of day-to-day, having done this job for quite a few years now, you sort of get set in your ways and kind of know how things should be and how things should work out. But, it's just day-to-days can be very, very different and very, very challenging.

Susannah Streeter: We look forward to getting more detail about just how you're coping a little bit later in the podcast, Adam, so thank you. We'll also be checking with our lead equity analyst, Sophie Lund-Yates, about some of the listed companies in this space, including Taylor Wimpey and Rightmove. Plus, we'll catch up with Emma Wall, our head of investment analysis and research, who's been speaking to Ariel Bezalel, an investment manager in the fixed income team at Jupiter Asset Management. And we will, of course, have the quiz and I've tracked down some weird and wonderful facts about house-building and demolition. Not bananas, Sarah, even though I know it's your specialist subject, it seems.

Sarah Coles: (Laughter) Well, do you know, I thought I was on safe ground, because I-, I do know a fair bit about the property market, but the mention of demolition, it does make me think you're not going to ask anything straightforward at all.

Susannah Streeter: Well, I'd hate to be too predictable. Anyway, before we get the sledgehammers out, let's take a dive into what could be in store for the housing market following the latest announcements from the government, because those expectations of steeply higher interest rates have come as a bit of a shock. Now, the Bank of England doesn't tell us exactly where rates will go, but it had already warned just before the budget was announced that the market expectation was for interest rates to rise from 2.25%, where they currently are, up to 4.75%. And then, of course, came Kwasi Kwarteng's mini-budget, which wasn't mini at all given the scale of the tax cuts announced. And now interest rate expectations are sharply higher, with the market pricing in that the bank could raise rates to around 5.5% by the middle of next year. And this has big implications, doesn't it, Sarah, for mortgage rates, and banks and building societies have been pulling some of the cheaper deals or at least putting products on hold.

Sarah Coles: Yes, now there was lots of confusion around, because lenders have been finding it extremely tricky to price mortgages because of this huge sell-off of UK government bonds, which are known as gilts. So ten-year government bonds are on track for their worst month in decades. So when rates rise, gilt yields also rise and this is key because they feed through into the swap rates that drive the fixed rate market. The swap rate is where a bank swaps a variable rate for a fixed one, which lenders need to do if they want to offer a fixed rate to customers. And the more that gilt rates are expected to rise during the life of the fix, the more the institution will charge the bank for its fixed rate, and that's to reflect the fact that they're having to take on more risk. And this feeds through into what banks then charge borrowers.

Susannah Streeter: So when rates rise, this always starts to raise questions about what it will do to demand and to prices.

Sarah Coles: Yes, a combination of rising rate and high house prices feeds through into these monthly costs, so we don't yet know how much this will affect demand, but there's always the chance that if monthly costs rise far enough, it won't just scupper sales, but it could also force owners to sell up, which could mean prices rise more slowly or even start to fall.

Susannah Streeter: And hikes in rates are likely to cancel out the gains from the savings brought about by the cut in stamp duty that was announced in the mini-budget.

Sarah Coles: That is a possibility. Of course, the stamp duty cut will ease some of the pressures on buyers right now and it's particularly welcome as house prices rocket and interest rates continue to climb. But increased demand as a result of the tax break could push prices up, which would unwind the benefit in the medium term. Plus, of course, it does nothing to tackle the supply side, which is a major part of the problem, given that the average agent had just 36 properties on their books in August.

Susannah Streeter: 36, well the government hopes to tackle some of the shortage of supply by creating these investment zones dotted around the country. Now, the idea, launched in the mini-budget, is that these areas will benefit from tax incentives, planning liberalisation and wider support for the local economy. The idea will be to make it easier to release more land for housing, minimise the need for planning permission and when permission is needed, to streamline the system. We're due to get more detail on these plans in the weeks to come. There's the question of whether it's enough, though, to have focused development in specific areas. House builders have to have a stock of land to enable them to plan their businesses and it takes time to build and sell the homes on a housing development, so house builders inevitably hold stocks of land under development, but companies have been criticised in the past for building up vast land banks, buying areas they could potentially build on, but not actually starting the work. However, delays to planning approvals and not allocating enough land for building have been blamed on causing delays to potential developments.

Sarah Coles: Yes and, of course, there are also questions around affordable housing, aren't there?

Susannah Streeter: Yes, others in the industry have criticised the mini-budget for not including enough incentives for the building of affordable homes to ease shortages in some areas for those on the lowest incomes. Although, in some areas, there seems to be plentiful supply of accommodation, the UK has pockets of housing crises, particularly in highly popular cities and towns, where employment opportunities attract really large numbers of people. And amid all of these challenges, the construction industry is grappling with labour shortages. In a recent snapshot from the Office for National Statistics, more than a third of firms working in the sector had experienced worker shortages. So, how are all of these issues affecting companies in the sector right now? Well, handily, our guest on the podcast today, Adam Pitt from house developer Stephens and Stephens, is pretty well-placed to inform us. And Adam, you mentioned a little bit earlier, there's so much uncertainty around-, tell me, what are the particular challenges facing the area of the country in which you work?

Adam Pitt: In Cornwall, being down in the, sort of, the left-hand part of the country, materials, I think, are one of the most challenging things that we face. Whilst we have all of the major retailers here, builders merchants etc., and because we're so far away, it takes a bit of time to get materials down to us. We don't have so much availability of stock as we would do, say, in and around London areas. And all of that sort of contributes to increased costs, rates on items, just simply to get it here, really.

Susannah Streeter: Given where you are geographically, presumably there-, well, do you have problems with some worker shortages? I suppose the, sort of, lack of affordable homes, particularly in coastal areas, must make it harder to find employees?

Adam Pitt: It does, being a smaller county as well, the population's not very high. The trades we do have are very good trades, just not a lot of them and maybe not so much of the specialist trades that we need here at Stephens and Stephens, because we build some very nice luxury homes, so our specs and our builds are of a high quality, so we often find ourselves having to go, sort of, further north, upcountry as we say, to procure more specialist trades. In recent times, we noticed that the European workers, after Brexit, had slowed down. Didn't have as many workers available to us, but we still look to source those workers from Europe. We make a great deal of effort to help them come and work here by helping them fill out all of their visas and their paperwork and try and go that little of an extra mile by offering some availability of accommodation, that we pay for, for them so they have somewhere to stay and work here.

Susannah Streeter: Do you think there will be an impact from the turmoil that we've witnessed more recently, in terms of concerns about rising interest rates?

Adam Pitt: Yes, interest rates are, without doubt, causing an effect. However, we feel the market is still strong. I think that's been counterbalanced, with us, very much with the decrease in-, or the change in the stamp duty that was offered, bringing it down to a little bit more of a level playing field from, sort of, the £250,000 to the £950,000 at the 5%, which should-, whilst it does help everybody in that entire bracket, that seems to be helping more first-time buyers, where they've eliminated that early part of the stamp duty.

Sarah Coles: One thing I wanted to ask you about is whether the fact that you're, sort of, dealing with a luxury product and specific sorts of customers, whether you're more protected from those sorts of, you know, the volatility? Whether your buyers are, sort of, keen no matter what, or whether they also are, kind of, taking a hit?

Adam Pitt: I think people are being much more cautious at the minute and taking a bit more time over their final decision to buy. Still have lots of interest, because, I think, in Cornwall, with our luxury apartments are being loaned to be, like, holiday rentals, that there's lots and lots of interest. Just with the current market, as I'm sure it is for everybody, decision making is not so prompt. But still, still very much interest.

Susannah Streeter: The pound has stayed pretty volatile and certainly is significantly lower against the dollar than a few months ago. What impact is this going to have, do you think, on inflationary pressures for you? Raw materials, for example, you mentioned earlier that they'd been volatile in price, do you think this is going to mean this will continue?

Adam Pitt: Yes, I think in the next year or so without a doubt, volatility in prices of materials is a big issue for us and it's something that we experience pretty much day-to-day. For instance, steel prices. We're currently building a reinforced concrete frame for one of our developments and for steel prices, when we've been procuring costs and prices, they've only been able to hold them for as little as four hours before us having to make an order. Along with that, when we do place that order, we have to take delivery almost immediately. One of the things we experienced the other day is we placed an order for reinforced concrete, which we placed an order on for 1200 cube, which was to cover our ground floor slab, and the cost went up by £7 a cubic metre the day before the pour we were about to do and then that ultimately, sort of, cost us about another £9,000, just to pour that one slab. Something that we feel we have to deal with, we're not going to adjust or slow down on our programme, so we have to carry on and make the best of the situation that it is. But yes, it is having an effect.

Sarah Coles: So obviously it all has an impact on, sort of, the projects you're working on right now. Presumably, it then has to get factored into future projects and, sort of, decisions about what you build and where. And do you feel already that those sorts of discussions will need to come up, just to, you know, maybe rethink exactly what the building plans are or do you think that given the nature of the buildings that you build that there'll still be the demand and you can just crack on?

Adam Pitt: I think, yes, I think we're going to continue with our product and the way it is and we still feel there's a market there to be had. It's a good opportunity for us, I think. Challenging times, we're very much a proactive developer, forever the optimist, and that comes from the very top, from Paul and Helen. And we're a passionate team about what we do, and so we see this difficult time as an opportunity to improve on our systems, improve on the way that we do things, improve on the way that we procure our materials.

One of the things that we've been experimenting with is off-site manufacture and in particular, one of our schemes, we've procured some bathroom pods, whereby the bathrooms for the scheme are already pre-made in a factory and they come as a pod room that we deliver out and install on-site at the early stage of the project and they're kept safe right until the very end, once you've built all your walls, done all your plastering and electrics, etc., and then you uncover them and they're all finished. So our object of that was to see if it's, sort of, more cost effective and better control over the product, better control over the end product when it's finished, less damage, less delay to the project.

We've also been looking at experimenting with off-site manufacture of timber framed houses for one of our schemes. Again to, sort of, save time, save some costs and hopefully they're going to be a positive way so-, good opportunity to-, trying to continue to think outside the box.

Susannah Streeter: And do you think the conditions will encourage more holiday letting over residential landlord investments?

Adam Pitt: I think so. Cornwall's always been a very popular place to come for holidays, and still is. And certainly through the pandemic we had a huge amount of extra visitors which put a lot of stress and pressure on everybody. Certainly, sort of, things like restaurants, hotels, pubs, etc. so I think holiday letting is still the way to go.

Susannah Streeter: That does have implications, as well, for affordable housing, doesn't it, in the region?

Adam Pitt: It does, we do get involved in affordable housing schemes, albeit currently we don't have anything under construction, but as part of being a developer, when we get our planning permission, we have to make contributions to the local authority as part of our planning for things like CIL, which will contribute to local housing, etc. So every scheme we do do, part of our planning is to make a contribution to the local authority. Payments to support schools and affordable housing etc.

Susannah Streeter: I think I know the answer to this last question I'm just about to pose, but if you'd like to live anywhere you could live, where would it be? Cornwall?

Adam Pitt: Without a doubt, Cornwall, yes, it's a fantastic, fantastic place to live. The environment's amazing, beaches are amazing, lots of outdoor activities, great places to visit, great places to eat and a great place to live. I think we're quite lucky in that to be a developer in this area we have some fantastic locations. Some of them are quite challenging and yet those challenging developments are often the best, there's some great views and some lovely places to be, great beaches etc.

Susannah Streeter: Okay, Adam Pitt from house developer Stephens and Stephens and perhaps a part-time tourist chief. Thank you very much.

Adam Pitt: Thank you.

Susannah Streeter: Well, let's bring in our lead equity analyst at Hargreaves Lansdown now to look at some listed companies in this space, so Sophie, probably makes sense to start by looking at one of the UK's core house builders. What's been going on at Taylor Wimpey?

Sophie Lund-Yates: Yes, there's definitely a lot to unpack here and Taylor Wimpey, as you say, is one of the UK's most recognisable house builders and, in all honestly, I'd say the group is doing really, you know, remarkably well. We heard back at the start of August that it had first-half revenue of £2.1 billion. Now that was down over 5% over the previous year, but that's because it was lapping that record performance we saw last year as we came out of the worst of the pandemic. More importantly, the group now expects full-year operating profit towards the top end of the range of £873 million-£924 million, and that is driven by average selling prices, which are expected to be 4%-5% higher than last year, which is fully offsetting the 9%-10% build cost inflation. It's important not to gloss over that inflation figure, I mean, you know, 10% is a huge number to be contending with. At the moment, as I said, those higher prices can offset that, but if we see that demand starts to taper, that higher cost environment could really hurt margins.

Now in terms of that demand profile, we know that the UK has a shortage of housing, which shores up the longer-term outlook to some extent. But with the recession looking more than likely, I do think the entire house building sector needs to be prepped for some tougher times ahead. Now, thankfully, Taylor Wimpey has a good financial position, so it can stomach some lumpiness in terms of progress, but certainly it's something to watch.

Now, the prospective yield is a big draw for the stock and at the moment there's more than enough cash flowing through the business to cover its dividend payments. Having a dividend policy linked to asset value rather than earnings means investors are more likely to receive a base-level of dividend, even in a downturn. Now, of course, though, yields are not a reliable indicator of future income and no dividends are guaranteed, so please just keep that in mind.

Susannah Streeter: So that's Taylor Wimpey, but what about companies advertising houses? Let's talk Rightmove.

Sophie Lund-Yates: Rightmove isn't really interested in housing prices, but rather the behaviour of estate agents and home builders who pay to advertise on their site. So, as you might imagine, given what I was just saying about the broad strength of the housing market, estate agent and home builder activity is looking okay. At the half-year mark, agents were paying an average of £1,262 a month to Rightmove and a growing number are opting for more expensive marketing packages as well. That helps off-set a stagnating number of active estate agents.

You know, Rightmove's operating model is admirable. Running what is essentially a website means there are fewer operating costs to contend with, that's something that is unlikely to change, but there are some things I'd flag. There will come a point when estate agents can't keep paying more for Rightmove, even though it's an essential service for them in today's world. You know, I can't envisage a time when they're paying £20,000 a month, for example, it's just not sustainable. That then puts the pressure on the house building developers, which I view as an area of growth, but will it be enough to keep things growing strongly, especially in the coming year, in the coming tough year? I'm not too sure.

Susannah Streeter: So we've talked about a house builder, a company advertising homes, now what about a company that makes all-important bricks?

Sophie Lund-Yates: I feel like this is the only environment outside my usual team that I can be openly excited to talk about a brick maker, which is what Ibstock does. Back at the half-year, revenue rose 28% to £259 million, reflecting strong demand and price increases to combat input costs inflation. Now, this fed through to underlying cash profits which you might see abbreviated as EBITDAR growth of 29% to £71 million and that was helped by a particularly strong performance in the clay division. Ibstock also expects full year performance to be ahead of an internal expectation and management is using its more efficient operations to pay for modernisation of two of its factories. That will increase capacity and allow the group to pounce on rising demand. Ibstock's also looking to become a leader in more sustainable housebuilding with the advent of a new division, which is Ibstock Futures. The first order of business for this new arm is brick slips, which is a type of lightweight brick façade. The group will spend £50 million over the next few years to build the UK's first brick slip factory and that's a venture that's expected to return roughly £10 million a year when all is said and done. Of course, you know, as with any new venture there is execution risk and then returns aren't guaranteed. Again, house prices don't really matter too much to this company. I mean, they only care if houses are being built, so if we see a moderate cooling off in construction activity it's not too much of a concern, but a steep drop off would be a bit problematic, I would say.

Obviously there have been a lot of changes in recent days with the pound falling sharply and I think the longer term situation for house builders hasn't changed too much, but these economic developments do increase the short to medium term risk, especially while we wait to see what happens with mortgage availability. So this is just something to really keep in mind when looking at this sector.

Susannah Streeter: Well thanks Sophie, it's certainly going to be interesting to see how things shake out across the sector. And if you're enjoying this podcast, please do let us know what you think and do subscribe wherever you get your podcast so you get a fresh new episode in your inbox as soon as it's ready.

Sarah Coles: So let's bring in Emma Wall now, our head of investment analysis and research here at HL. She's been talking to Ariel Bezalel, an investment manager in the fixed income team at Jupiter Asset Management.

Emma Wall: Hi Ariel.

Ariel Bazalel: Hello, hi Emma.

Emma Wall: So it has been an extraordinary couple of weeks for the economy, for the stock market and particularly for the bond market. I think this is a period that will be studied in economic history, at university in time to come. Shall we start from the top? Kwasi Kwarteng, the new chancellor, delivered a budget which seemed to shock markets. What happened?

Ariel Bazalel: We had the new administration come in, Liz Truss and Kwasi Kwarteng, and the gilt market was extremely unhappy, as was the currency market because Kwasi Kwarteng announced a so-called mini budget which turned out to be very, very aggressive from a fiscal perspective. And the reason why the gilt market was spooked was really because he didn't present any plan, any, kind of, coherent fiscal plan that would look to reduce debt in the medium to longer term. The gilt market therefore saw a deluge of supply in terms of gilts to help finance these very aggressive plans but then also the market freaked out about the prospect of even higher inflation. So at one point the market was pricing in a terminal rate. Now that's basically where they think the Bank of England will have to take rates of, in excess of 6% at one point.

Emma Wall: And let's put that into a bit of context over the last couple of years because in the UK we have a pretty good credit rating, and the better your credit rating the lower the yield you can expect off government bonds generally because, as with a lot of things in investing, you do get paid to take on risk. So gilt yields have been around 2%, haven't they, for quite some time? At points in the last five years even much lower because of the backdrop of very low interest rates. So to see them go up to 6% is really quite something.

Ariel Bazalel: It's been an incredible about turn in markets. You're quite right Emma, I mean, the trend for much of the last, you know, 30 plus years has been lower and lower rates. We saw gilt yields, together with high quality government bond yields, plumb to depths that we hadn't seen in history, literally. And then in the last twelve months we've had quite an aggressive sell-off in government bond markets around the world, and these measures recently announced by Kwasi Kwarteng absolutely led to a further sharp sell-off in the last couple of weeks.

Emma Wall: And why was this such a problem? Why is everybody scrabbling around? Because on the face of it you think, okay, yields have gone up, well prices go up and down in a market. Why is the gilt yield so important?

Ariel Bazalel: Yes, the reason why the gilt yield is so important, I mean, ultimately it's the rate at which the government funds itself, which it finances itself. But then there's a chain reaction through the financial system because we found out the reason for the sharp sell-off was simply because pension funds had taken on these liability-driven investment strategies to help meet liabilities.

Emma Wall: And those liabilities are literally people retiring because that's the whole point of a pension, right, is to pay you an income in retirement?

Ariel Bazalel: Spot on. And the very, very sharp sell-off we saw in gilt yields led to these very complex derivative strategies having to meet margin calls, and in order to meet margin calls you've got to raise cash. So to raise cash it turns out that these strategies were aggressively selling literally anything they could, and that included obviously gilts, which exacerbated the sell-off, but also equities as well. That had a chain reaction not just across the UK financial system but literally across the globe as government bond markets across Europe and America repriced very significantly. Now, ultimately as gilt yields move higher, that means a higher discount rate and that means lower equities as well, so that's why we had a pretty sharp sell-off across equities, and obviously corporate bonds as well were caught in the firing line. Particularly investment grade corporate bonds, because they were also one of the assets that these funds were trying to off-load.

Emma Wall: It's an extraordinary series of events which caused, as you say, issues globally. This seems to have abated now, also the pound significantly slumped even further than it has already this year against all major currencies. It seems to have slowed, so what did they do? Why have markets now become a bit more comfortable and the gilt yield come down a bit, and also from your point of view as a professional investor in fixed income across all types of bonds, how did you react?

Ariel Bazalel: Yes, so humiliatingly Liz Truss and Kwasi Kwarteng had to backtrack. They had to come out with some soothing words, you know, talking about bringing their fiscal plans to help try and get the government finances longer term on a healthier footing. So we saw them backtrack obviously on the top rate of income tax cart and then we're hearing that Kwasi Kwarteng is going to announce, you know, other measures to help pay for this big spending. So for now that's calmed down the gilt market, so we've seen quite a sharp rally, especially at the long end. The long end was also helped by the Bank of England's intervention which finishes on the 14th of October. So, you know, Kwasi Kwarteng really has to ensure that there is a, kind of, coherent fiscal plan to help balance the books longer term before then, otherwise once the Bank of England steps away we could quite easily be back to square one again. That also goes a long way to explain why, you know, we've seen a sharp rally in sterling over the last few days. I think a lot of that is undoubtedly due to positioning. I think a lot of people had been long the dollar across a whole array of currencies including sterling, and so this, kind of, more soothing words from Liz Truss and Kwasi Kwarteng has definitely helped to calm the waters there a bit. In terms of what we've been up to, on the back of this we have seen some pretty cheap investment grade paper coming up for grabs, so we've bought some of that.

Emma Wall: And you look for long term returns for your investors so at some point, as you say, there may be some opportunities that have popped up in the last week and a half, but some of it surely is just holding tight and looking through the extraordinary noise in the markets?

Ariel Bazalel: Yes, you're spot on and that's what we try and do. We try and take a longer term view. These, kind of, dislocations, we don't panic, we do our homework. To be quite honest, I mean, over the last few months we're getting more and more excited about corporate bond markets. We're seeing some really great value across investment grade and even in parts of high yield, at the better end of high yield. So, yes, for the very, very short term this was a bit disruptive to the fund but nevertheless it presents more opportunities for sure.

Emma Wall: Ariel, thank you very much.

Ariel Bazalel: Pleasure, thank you.

Susannah Streeter: And that was Emma Wall, our head of investment analysis and research, who has been speaking to Ariel Bezalel, an investment manager in the fixed income team at Jupiter Asset Management. Please bear in mind that these are the views of the fund manager and are not individual stock recommendations. You're listening to Switch Your Money On from Hargreaves Lansdown.

Sarah Coles: And finally it's time for the quiz, and I'm expecting some questions on the weirder and more wonderful aspects of house building.

Susannah Streeter: And don't forget the demolition. In fact Sarah, let's start there. So, first question, in 2020 a house in Dallas, Texas, hit the headlines after it was demolished for an unusual reason, but what was it? Was it a moment of fury from someone locked in an argument with their partner, a homeowner obsessed with squirrels nesting in the roof or did the crew accidentally demolish the wrong house?

Sarah Coles: I have no idea. I mean, I really can understand the frustrations over squirrels because it's been so difficult to persuade mice to leave my garden shed so I think I'm going to go with the squirrel infestation.

Susannah Streeter: No, I'm sorry, I know it was a bolt from the blue but it was too good a story to miss. Apparently the demolition crew pulled down the wrong house. It had been bought as a renovation project so it was empty and rundown and there was no house number on it, and when the crew arrived on the street to demolish a different house, they took one look and assumed that this was the one destined for demolition. Can you imagine the shock when they realised the mistake?

Sarah Coles: Well, the shock and the humiliation of your house requiring demolition, that would be terrible.

Susannah Streeter: Okay, let's stick with the demolition theme. There was a case in the UK of a farmer who built a £1 million castle on his land and he was forced to demolish it in 2016. Now, he built it without planning permission because he thought he'd found a clever way around the planning rules, but what was his cunning wheeze? Was there a law from the 12th century which permitted the building of castles on your own land, was there a rule that said he could keep it if nobody spotted it for four years, or did he keep cows in the ballroom and was passing it off as a barn?

Sarah Coles: I love all of these options but I actually think I know this case. It was around this four year rule, wasn't it? Didn't he try and hide it for four years?

Susannah Streeter: Yes, he did. He did gain quite a lot of coverage at the time. He built the home and then kept it covered in a giant haystack covered in tarpaulins, believe it or not. He took the haystack down in 2006, revealing the castle, claiming that because no one had complained about it during the previous four years he was in the clear. But there then followed a decade of legal wrangling before it was decided that the removal of the hay bales was part of the building process and he had to knock it down. So there we are. Okay, wasn't so much of a cunning wheeze after all, was it? Okay, enough about demolition, onto building. So in 2019 all the political parties promised they would deliver more housing. The Conservative target was 300,000 a year by the mid-2020s but how far shy of the target was the net new housing number in 2020, 2021? Was it 24,000, 54,000 or 84,000?

Sarah Coles: Well, I mean, thinking about that particular year, so obviously there were loads of COVID problems then but I can't imagine it would be 84,000 short, so I'm going to go with 54,000.

Susannah Streeter: I'm sorry, you were right that COVID took its toll but it was a far bigger one actually than you thought. The number of new homes was 84,000 shy of the target. So far the closest year to the target was a year earlier when it was 57,000 short. Never mind, you didn't get that one. Finally though, let's see about the last one, can you score, Sarah? The biggest house in the world was finished in 2010 and it's a 27-storey high personal skyscraper in Mumbai. It has 37,000 square metres of living space but how much is that in terms of football fields? Is it around 1.5, 2.5 or 3.5?

Sarah Coles: Oh no, I'm scuppered here by the fact I haven't a clue how big a football field is, despite the fact I do watch my kids play on them every weekend. I suppose I know how exhausting they are to run around and nobody surely can be bothered with a home they couldn't get around, so I'll say 1.5.

Susannah Streeter: No, it's almost 3.5. There's no wonder there's room for 600 staff in there. So I suppose there are plenty of people to hoover it. I'd quite like a few more in my house to share the hoovering.

That's all from us for this time but before we go we do need to remind you that this was recorded on October 3rd 2022 and all information was correct at the time of recording.

Sarah Coles: Nothing in this podcast is personal advice, you should seek advice if you're not sure what's right for you. Investments rise and fall in value so you could get back less than you invest, and past performance isn't a guide to the future.

Susannah Streeter: Yes, this is not advice or recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment and investors should form their own view on any proposed investment.

Sarah Coles: And this hasn't been prepared in accordance with legal requirements designed to promoted the independence of investment research and is considered a marketing communication.

Susannah Streeter: Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place including dealing restrictions, physical and information barriers to manage potential conflicts of interest presented by such dealing.

Sarah Coles: You can see our full non-independent research disclosure on our website for more information. So all that's left is for me to thank our guests, Adam, Ariel, Sophie, Emma and our producer, Elizabeth Hotson.

Susannah Streeter: Thanks so much for listening, goodbye.