A weekly news summary by Pierre Williams, HBF head of media, covering all aspects of the housebuilding industry. Available to members only.
Rents Rocket as Buyers Delay
Rents are rising sharply as would-be buyers increasingly decide to continue renting rather than enter a cooling market. A survey by Rics suggests there is such strong demand - particularly for entry-level flats - that demand is now exceeding supply as the buy-to-let boom tails off. Most surveyors expect this trend to continue through the winter with rents regaining ground lost in 2001-02. Overall demand for rental property was up more than 20% in the three months to the end of October, compared to the same period last year. London leads the way, followed by the south west. There has also been a slowdown in the number of landlords selling up. The Rics findings are backed up by Knight Frank which reckons prime central London buy-to-lets will thrive next year with an increasing number of investors already seizing on buy-to-let bargains. (FT, Business)
HBF Note: Nothing could prove housing undersupply better than this. These figures should provide a good marketing tool for new home sales and a convincing argument for potential buy-to-let investors
Halifax Predicts Good Times After Temporary Falls
The Halifax has predicted a 2% fall in house prices next year and revealed prices fell by 0.4% last month. But it has firmly dismissed a crash and instead expects a new boom to follow as interest rate cuts open the floodgates to pent-up demand from first time buyers. The bank reckons base rates will be cut by 0.5% by the end of 2005, bringing average mortgage payments for new borrowers down to a new low of 16% of earnings. At the same time, it expects housing equity to rise to a record high, providing a solid cushion against any moderate fall in prices. The banks Chief Economist, Martin Ellis, said: We believe rates have peaked at 4.75% and expect a half-point reduction during 2005. After that, we expect the market to record price increases. Affordability will also improve, especially for first time buyers who will return to the market in larger numbers. The fundamentals underpinning the housing market remain sound. (Express, Telegraph, Independent)
Nationwide Predicts 2% Rise; CML 4%
Although the Halifax expects moderate price falls next year, the Nationwide and most other housing market commentators take a more bullish view. The Nationwide expects prices will rise by 2% in 2005, a view boosted by its figures suggesting prices rose by 1% last month. The CML is even more bullish and reckons a rise of 4% next year. (All media)
Bank Holds Rates and Boosts Housebuilders
As expected, the Bank of England kept interest rates on hold this month at 4.75% - a move that boosted housebuilder stocks. Barratt jumped 16p to 534.5p; George Wimpey rose 12.5p to 385.75p; Persimmon gained 27p to 642.5p and Berkeley rose 23p to 753p. (Times)
HBF Note: Although the whole sector was boosted by the rates decision, Persimmon and Berkeley were boosted by other news - see following items
OECD Calls for Series of Rate Rises
The Organisation for Economic Co-operation and Development (OECD), says the Bank of England should introduce four quarter-point interest rate rises next year. Its reasoning, which runs counter to the view of most economists, is that the Britains service industries are experiencing strong growth and this inflationary pressure will require rate rises in future to keep in check. (Times)
High Street Spending Unfazed by Rate Rises
Higher interest rates have, as all the evidence suggests, put the brakes on the housing market. But the latest figures suggest consumers have simply switched their spending from housing to having a good time. A CBI survey shows a spending surge in the leisure and travel sectors although High Street spending appears to have taken a hit. This adds pressure for a rise in interest rates but with no certainty that this consumer confidence will continue, the CBI has wasted no time in urging the Bank of England to keep rates on hold until a firmer picture emerges. (Times)
New Homes Fail Energy-Efficiency Standards
Almost half of all new homes are failing to meet energy-saving standards. A study of 100 new homes by the Energy Efficiency Partnership for Homes claimed 43% failed to meet building regulations. The main problems found were those of poor workmanship with poorly sealed flues and pipes, gaps around external doors and windows and inadequate boilers. The study found that the smaller the home, the more likely it was to comply with regulations, with 87% of flats passing but only 57% of houses making the grade. (Telegraph, ITV News)
HBF Note: This is seriously damaging to our industrys reputation and largely destroys a strong selling point for new homes. It also could not have come at a worse time with the government this week conceeding that it is failing its own greenhouse gas emissions targets. With most of the problems being caused by relatively simple omissions, perhaps extra focus on this area would produce dividends.
FTBs Need Four Years to Save a Deposit
First time buyers how have to save for more than four years to amass the necessary 5% deposit for a mortgage - almost twice as long as was necessary a decade ago. That 5% is almost 7,000 for the typical first time buy of 137,000, and the difficulty of saving such an amount is reflected in figures showing that the number of first time buyers in the UK has this year fallen more sharply than in any other country. (Express)
HBF Note: Linking this to the first item showing that rents are recovering strongly suggests that prospective FTBs are out there - but that they just cannot save a deposit. So maybe deposit paid incentives on smaller units might be particularly effective in the current market.
No Parking? - Wed Rather Move!
A third of us would move home rather than lose our parking space, while 17% already find it hard to park outside their home, according to research from the RAC Foundation. With councils currently spending twice as much on pedestrian facilities than on parking, the organisation says car-parking policies are ill-thought and inconsistent, fail to meet current needs and will worsen rapidly as car-ownership rises by an estimated 45% over the next 25 years. (Independent, Metro)
HBF Note: All this is stating the obvious but the reality simply has either not dawned or is being ignored by the proponents of PPG3.
Council Orders Demolition of Over-Height Homes
Housebuilder Silver Homes has been ordered to demolish three new homes after neighbours complained they were a metre too high. Mid Sussex District Council investigated and found the claims to be correct. Offers by the developer to erect a boundary fence and screen the houses with landscaping were rejected by the council and unless a successful appeal can be lodged or some other compromise worked out, the three homes worth 750,000 will have to come down. Managing Director Andrew White took the news with good grace: We made a mistake is the honest answer. We got it wrong. (Times, Express)
Billionaires Bite at Cherry
Billionaire Joe Lewis, who, through an off shore investment vehicle, Rock Pacific, quietly amassed a 28% stake in Countryside Properties, is now thought to be planning a possible bid for the firm. If successful, the bid would trump an offer for the firm by its chairman and founder, Alan Cherry and family. But whether the supposed bid is real or simply a short-term game to force the Cherrys to raise their bid so producing a tidy profit for Rock Pacific, is not clear. (Observer, Independent, FT)
Persimmon Planning an Extension
Persimmon has secured a 500m credit facility leading to strong City speculation that CEO John White is looking for a significant acquisition that will fulfil his long-held ambition to be the first housebuilder in the FTSE 100. Analysts have been busy speculating who might be on Persimmons shopping list. (Mail)
Pidgley Hits Nail on the Head
Berkeleys wisdom in scaling down operations and returning cash to shareholders has paid off handsomely, the groups Chairman Roger Lewis said yesterday. First-half pre-tax profits fell just 5% to 110.5m - far better than analysts had expected. Confidence was further buoyed by a strong rebound in reservations last month. The news has prompted Berkeley directors to dismiss a housing market slump, although conditions are likely to remain tough for a while. (Telegraph, Times)
HBF Note: The Telegraph comments that Tony Pidgleys downsizing of operations could not have been better timed. His elegant scheme finally won through and, five months on, the grumbles (from some shareholders) look pretty silly. It just goes to show why Pidgley is worth his stonking rewards. Hes not forecasting a housing collapse but instead a firm, if difficult market. Who would bet against him?