Margareta Pagano: How to boost housing? Ask the boy from Bovis - Margareta Pagano - Business Comment - The Independent

Margareta Pagano: How to boost housing? Ask the boy from Bovis

David Ritchie, the chief executive of Bovis Homes, is not sure whether to laugh or cry.

As the boss of one of the UK's biggest house-builders, he's happy that Bovis has survived the financial crash in rude health, has cash in the bank, has bought new land some 50 per cent cheaper than a couple of years ago and will have 4,000 new units this year. Even if house prices continue to fall, Bovis forecasts a return on capital of 20 per cent as costs have been brought under control; the days of a £70,000-a-year bricklayer are over.

But the tears come when Ritchie looks at his share price, down in the dumps at 355p even though net asset value is about 570p a share, and for this he blames the "macro-fear" hanging over the market, which has seen so many house-builders go bust since the crash. And, as we saw again last week, it's the freeze in mortgage lending to first-time buyers which is the cause as lenders demand a high loan to value; a 25 per cent deposit is now the norm. Two years ago, the average age of the first-time buyer was 28 – today the age has rocketed to 38.

You only have to look at the sharp drop in first-time buyers. Between 1984 and 2002, there were about 500,000 a year. By 2009 this had dived to about 199,000; so far this year there are just 43,451 first-timers.

Yet there is still huge demand. As Ritchie says, there aren't many businesses where the manufacturers have the capacity to meet the demand but are not able to because there so many obstacles – councils not releasing enough land, for one, and lack of first-time buyer deposits. For once, we can't put all the fault on the UK's land shortage in the South-east, although it is still a big part of the problem.

House-builders could build about 170,000 units a year, but last year they built only 140,000 – the lowest figure since 1924, and it will be lower this year. So what to do? House-builders such as Bovis have schemes to help; Jump Start and Perfect 10 are two wheezes whereby the house-builder and lender share in the purchase. But these are not enough to kick-start the market in a meaningful way, and run the risk of misleading customers when interest rates rise. Instead, Ritchie tells me, the coalition should be stepping in to underwrite the insurance for mortgage default, thus encouraging the banks to lend more loan to value. He reckons the house-builders would share the cost.

It's not a bad idea and could help everyone; for the Government it's a low risk as mortgage defaults are tiny, at 0.4 per cent of the total; it gets people back on the ladder and gives the construction industry a fillip as every house built creates 4.5 new jobs. There's the social benefit too; all research shows that the young owning their own homes creates a more stable society. That's also why it's so important that the coalition comes up with carrots and sticks with which to force local councils to release land. It's not new homes which destroy communities, but Nimbyism.

Margaret Thatcher won over the voters with council-house sales; the coalition could play a blinder if it got together with house-builders and banks to get the market moving again. I'm sure Ritchie could get talks going with Grant Shapps, the Housing minister, who conveniently lives in a Bovis home in Hatfield. Then maybe the market, and Bovis shares, will start moving again.

Check it out: Burberry's Ahrendts is crowned retail queen

From Basingstoke, where it started more than a century ago, to Berlin, the Burberry story just keeps getting better. Burberry boss Angela Ahrendts was crowned retail queen at the World Retail Congress in the German city last week when she was given the Outstanding Leadership Award for her work in turning around the beige-black-red-and white scarf and trench-coat maker; it is now one of the world's most sought-after brands. Ahrendts told the audience that part of Burberry's success has been in going digital, with more than two million Facebook fans able to watch most of its catwalk shows live. Whether Ahrendts, who has seen the shares nearly triple to 1,020p on her watch, can keep marching at this pace is the big unknown; the answerh lies somewhere in the East, where she is expanding fast.

With this King leading the Roundheads against the Cavaliers, can the Puritans win?

Mervyn King, the Governor of the Bank of England, hasn't lost his touch. In New York last week, he took his radical, if not puritanical, ideas right to the heart of the powerful at the Buttonwood Gathering, when he criticised the big banks and even hit out at the new Basel 3 rules as being too soft.

That was the gentle bit. If anyone thought King was wavering in his belief that some sort of separation or break-up of the banks is the thing to do, they should have heard the next part of his speech: "Of all the many ways of organising banking, the worst is the one we have today." He went on to question our fractional reserve banking system which has existed for centuries; the way banks take in deposits and then – in such cavalier fashion – lend them out for longer-term loans at higher risk; ie, leverage. In his own words: "For all the clever innovation in the financial system, its Achilles heel was, and remains, simply the extraordinary – indeed absurd – levels of leverage represented by a heavy reliance on short-term debt." As he added, any solution to this must ensure that the costs of "maturity transformation" (the costs of bailouts) fall on those who enjoy the benefits; the bankers.

This is fighting stuff, but then the future structure of banking is at stake, and the battle will be bloody.

The big question is: Which side will the Independent Banking Commission take? If commissioners prove to be Roundheads and go for reform, will they be brave enough to stand up to the firepower of the Cavaliers? Wall Street and the City will fight furiously to keep the system exactly as it is. But with this King leading the Roundhead charge, hopefully they'll show their mettle.

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