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05May94 UK: LAND SHORTAGES MAY HOLD BACK BUILDERS.

If anecdotal evidence is to be believed, the April tax rises appear to have had little effect on the recovery of the housing market. The rash of cancellations which house builders feared do not appear to have materialised. If anything, the talk is of rising house prices; up at an annual rate of 5 per cent, according to one source.The danger now is that house builders will struggle to obtain sufficient land at acceptable margins.More than half the respondents in a recent House Builders Federation survey said rising land prices and land shortages were 'seriously restricting' their ability to meet demand.Medium-sized players with long land banks, including the soon-to-be-floated Redrow, can maintain output by dipping into their reserves and avoiding paying the more extravagant asking prices for land.But the large volume house builders who all have ambitious targets to increase unit sales in the coming years must sustain their level of land buying, come what may.How successfully the industry can do this, while preserving margins, may be the key factor governing its pace of profit recovery. CONSTRUCTION NEWS