Tuesday, April 05, 2011

Could Taylor Wimpey's Pete Redfern have done better?

When a property chief executive says about the house price crash of 2007 ' No one could have seen what was coming...' (FT 5 April 2011: Taylor Wimpey back at the crease) you do puzzle just a little. Mr Pete Redfern  joined George Wimpey in about 2001 and sorted out the McAlpine Homes bit of that before becoming Chief Executive of the combined Taylor Wimpey which is now No.2 UK builder. Obviously a capable operator, to an extent.  

The Taylor Wimpey deal was done in January 2007.  Another UK developer / housebuilder, Linden Homes was sold to Galliford Try in February 2007 (Building). This was particularly neat timing by the owners of  Linden as they sold the outfit within a whisker of the top of the house price market. This rose from £184,143 in Jan 2007 to £189,316 in July 2007 and then crashed down 20% in Jan 2009 (see chart). Did Linden's  owners know something? Had they read Fred Harrison's books on the repeating 18 year land / business / house price cycle? In 1997 he predicted that the house market would peak in 2007 (2010 The Inquest read my review).

Redfern in the FT today is refreshingly candid, but it is all very well. The TW share price was about 430p in Jan 2007 and is about 40p now (9% of its value).  I wonder if chief executives ever read in-depth about every aspect of their industry? Fred Harrison has been publishing regularly on 18-year price cycles since his book The Power in The Land in 1983. OK, Pete Redfern was 12 at the time but since then his property industry experience never seems to have prepared him for 2007, despite Harrison's insights. 

Some homework: find out who sold Linden Homes in 2007, ask was it fluke timimg? If not and they are still in property, invest in their firms. But, a caution, watch this blog because land value tax might come into the equation, judging by recent Coalition Government tax policy ideas. This new factor in property development ought to be considered even for those who get the timing right.
posted by Charles Bazlinton.

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