The comments come after Bovis Homes Group revealed last week that it had received proposals from Redrow PLC and Galliford Try outlining a potential merger.
The Bovis board concluded that neither proposal reflected the underlying value of the business and rejected the offers.
Bovis also reported that Redrow would not improve the terms of its proposals and ended discussions, while the housebuilder remained in talks with Galliford Try.
This news has led to those within the industry questioning whether a merger between two major housebuilders would be a good idea and could improve housebuilding.
“It's not a good thing for housebuilding,” warned Michael Dean, principal at Avamore Capital.
“Less developers means less competition, [it] concentrates more sites in fewer hands and will lead to less supply coming through.”
Last year, those within the property industry warned that too many large-scale development sites were going to major housebuilders.
Back in December, communities minister Sajid Javid also cautioned developers and housebuilders that the government would no longer aid in the creation of land banks after revealing that in 2012 permission was granted for more than 195,000 homes, but three years later 40,000 were still yet to be completed.
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James Bloom, managing director of development finance at Masthaven, felt that a merger or takeover of a firm the size of Bovis would be a major move for the industry and would create one of the UK’s top five housebuilders.
“Given Bovis’ very substantial land bank it could well speed up UK housebuilding, and create additional units.
“I think it’ll be very interesting to see how this develops and the ramifications for the market.”
James also pointed out that the talks were occurring after Bovis revealed that it had experienced weaknesses in its production process and had set aside a one-off £7m customer care provision as a result.
Ashley Ilsen, head of lending at Regentsmead, felt that for a while there had been some significant movement at Bovis with regards to a takeover or merger.
“The incentive for them – as with all major housebuilders – is to reap the further benefits of economies of scale and put themselves in better stead to compete with their larger counterparts.
“For me it’s not necessarily a matter of ‘speeding up’ housebuilders; I would associate this phrase with a lack of due care and attention to the finer details of housebuilding.”
Ashley concluded by adding: “What I find curious is the gulf in quality in the end product of major housebuilders and our SME clients at Regentsmead, who undoubtedly have significantly higher levels of attention to detail.
“For me it will be the SME housebuilder that could unlock the vast lack of housing that we need to build in the UK.”