A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
No surprise as the Bank of England leaves rates unchanged
In line with a Reuters poll, which showed all 45 economists surveyed forecasting no change, the Bank of England left the Repo rate at 4.75% at the 8/9 June Monetary Policy Committee meeting. {http://www.bankofengland.co.uk, Financial Times)
BRC report further gloom on the high street
The British Retail Consortium (BRC) reported that retail sales were 2.4% lower in May than a year earlier on a like-for-like basis, a 1.5% fall from March to May. BRC Director General Kevin Hawkins commented: “While some analysts still claim that the continuing weakness in retail sales is only a ‘blip’, these figures should remove any lingering doubt that we are now in a consumer-led recession. There has been little or no improvement in any sub-sector of the retail industry and some are reporting a further deterioration.” While the BRC argued for a cut in interest rates, however, the CBI said rates should be left unchanged for now. (http://www.brc.org.uk)
Experian predict retail sales “to slow next year too”
Consumers are facing the prospect of the roughest ride in a decade as higher interest rates and a cooling housing market dent confidence and hit spending power, the research and information group, Experian, has warned.
Experian expects growth in consumer spending to drop to a 10-year low in 2006. However, inflation rates are likely to edge above the Bank's 2% target in the near future, the consultancy said. Neil Blake, economics director, said: "With inflation rates expected to edge above the official target in coming months, speculation about further (interest rate) hikes is likely to continue, while cuts are not in prospect before 2006."
Political Events
Working Time Directive
At its meeting on 2 and 3 June, the European Council deferred a decision on the future of the opt-out from the 48 hour working week provided for by the current Working Time Directive. The UK has argued strongly for the retention of the existing opt-out along with some of the new EU member states. Prior to the Council the European Commission had proposed a compromise of a phased ending of the opt-out coupled with the extension of the reference period to a year, but no agreement could be reached on this. Discussions will now continue on a possible compromise package. A final resolution will probably not be reached before 2006.
Conservatives support government line on Working Time Directive
Shadow Trade and Industry Secretary David Willetts commented that: “If European countries want to compete in the 21st century, they can't go on making their economies more and more inflexible. Rather than trying to tell British employees when they can work and when they can't, Europe should focus on raising its economic game." (http://conservatives.com)
Deputy PM announces £60,000 home participants
Deputy Prime Minister John Prescott announced that 33 organisations are to be invited to participate in the next stage of the “Design for Manufacture Competition”, where house builders will design and construct homes for around £60,000.
Mr Prescott said: "Innovation and imagination is the name of the game. This is a stretching challenge but one that is necessary if we are to tackle the problems we face in terms of housing shortage and buyers being priced out of the market. Twinned with that I want to stimulate fresh thinking in the industry with the UK becoming world leaders in terms of construction methods and design excellence. I am looking forward to seeing the developed proposals in Stage Two - let's see what can be achieved and really make this Competition a success - I wish all 33 organisations the best of luck in this next stage." (http://www.odpm.gov.uk)
Social HomeBuy income thresholds announced
Following up previous pledges for shared equity schemes for council and housing association tenants, Mr Prescott also announced that tenants with joint incomes below £15,000 in the North of England and £20,000 in the South East could be eligible to buy a share of their homes.
Mr Prescott commented: “Social HomeBuy will help tenants into partial home ownership and with the money they pay being used to reinvest in new social housing. This will make available sooner for families in temporary accommodation and on council waiting lists new homes. We want families on lower incomes to get a foothold on the housing ladder but not at the risk of taking on financial responsibilities they can't sustain. There will be strict checks to ensure this, with the consultation proposing several measures to ensure anyone entering into home ownership through one of the schemes is able to sustain the long term costs." (http://www.odpm.gov.uk)
Early Day Motions attack Government's Sustainable Communities Plan in Essex and West Sussex
Two Early Day Motions in Parliament this week express the concern of a number of Conservative MPs at planned housing development in Essex and West Sussex. The core wording of the EDMs is identical, both referring back to the Environmental Audit Committee’s January report criticising the lack of a proper assessment of the environmental impact of the Barker proposals for an increase in housing supply in the South East in particular. The EDMs suggest there is likely to be concerted campaigning on these lines from Conservative politicians. The full text of the Essex EDM can be found at: http://www.publications.parliament.uk
HBF Note: ODPM has commissioned a study from consultants Entec to look at the environmental and related impacts of a major increase in housing supply which is due to be presented to Government shortly. HBF is separately seeking early meetings with both the new Conservative housing and planning spokesman, Robert Syms MP, and the Liberal Democrat front bench team.
Housing Market News
Halifax reports that prices are broadly unchanged in 2005
The May Halifax House Price Index showed a 0.6% fall in May, to leave prices 5.7% higher than a year ago, the lowest rate of annual growth in four years. Halifax noted that: “UK house prices are broadly unchanged so far in 2005 with a decline of 0.5% in the first five months of the year.”
Looking ahead, Group Economist Tim Crawford said: “We continue to forecast a modest decline of 2% in house prices this year across the UK. The market is underpinned by sound fundamentals including record employment levels, good affordability and rising real earnings.” (http://www.hbosplc.com)
Other News
Government Statistics show sharp rise in density
The ODPM’s Land Use Change Statistics revealed a sharp jump in the average density of newly built dwellings to a provisional figure of 39 dwellings per hectare (dph) in 2004. This figure has risen from 34 dph in 2003 and 25 dph between 1996 and 2001. Yorkshire and the Humber was the only region with average densities under 30 dph, while, at the other end of the scale, London saw a new build density of 73 dph.
The proportion of new dwellings built on previously-developed (brownfield) land remained at a provisional 67% in 2004, where it has stood since 2002, after rising from around 55% in the mid 1990s. This is comfortably above the government’s target of 60%. (http://www.odpm.gov.uk)
CPRE welcomes government’s affordable housing plans
Countryside campaigners and planning organisations lobbying for a bigger drive on housing have welcomed the news that ministers plan to release more public sector land for affordable schemes. They also welcomed the latest land use statistics, which show that the average density of housing development increased from 34 homes per hectare in 2003 to 39 per hectare in 2004. The Campaign to Protect Rural England (CPRE) welcomed the news. CPRE planning officer Kate Gordon said that overall, "these figures are good news". The organisation voiced some concerns that the proportion of dwellings built on previously developed land, at 67 per cent, has stayed at the same level for three years. (http://www.planningportal.gov.uk)
Government target for new homes in Thames gateway may not be reached
Doubts were raised over whether government targets for 120,000 new homes to be built in the Thames Gateway region by 2016 can be reached. Home builders have complained of delays in the planning system as a public inquiry into the Thames Gateway Bridge begun. Weston Homes commented: "We are being systematically frustrated and blocked at a local planning level, and development in the region is grinding to a halt."
Andrew Whitaker, head of planning at the Home Builders Federation, said the problems were being replicated across London and the South-East. He said: "The planning process is very, very slow. If it's failing somewhere like the Thames Gateway, which is a flagship project, that's of great concern. A lot of store is being placed on the Government's changes to the planning system but we have yet to see any tangible speeding-up."
Meanwhile, council chiefs insisted they were providing an adequate flow of planning permissions and accused house builders of failing to make use of land on which planning permission had been granted. (Evening Standard)
Plans for world's largest wind farm in Thames Estuary
Plans to build the largest wind farm in the world are in the pipeline for the Thames Estuary. An application has been submitted for the £1.5 billion renewable energy project, which could potentially supply electricity for more than 750,000 homes. Around 270 turbines would be built offshore, 12 miles from the Kent and Essex coasts. (The Times)
Environment Agency report finds decline in land quality
A new Environment Agency assessment of the state of the environment in England and Wales has classified land as being in “slightly worse” condition this year than in 2004. The rating was based on data showing that while contaminated land clean-ups are improving, poor soil management and careless use of land continue to have damaging effects on our environment. A better place, reported that climate change, wildlife and flood risk were the biggest problems and should be top priorities for future action. (http://www.environment-agency.gov.uk)
Government scales back housebuilding plans funded by Social Homebuy
The government overestimated the number of new homes that could be built from the proceeds of its flagship scheme to sell off a stake in up to 300,000 housing association and council homes, new figures reveal. In January the deputy prime minister, John Prescott, said up to 300,000 tenants would get the chance to buy at least a 50% share in the value of their home, under a scheme known as social homebuy. Announcing the initiative, his officials claimed that for every two homes sold under the plan, another one would be built from the receipts raised. This replacement rate has now been downgraded to one in three, amid concerns that the scheme could threaten the financial viability of housing associations. (Guardian)
Housing Corporation news blitz
The Housing Corporation this week made a series of important new policy announcements:
It has changed the name of the Approved Development Programme to the National Affordable Housing Programme (NAHF) and invited pre-qualification for the 2006-08 bidding round.
Stated in supporting documentation that the 2006-08 bidding round as a whole will be open to “non-registered” bodies – that is, private developers – while giving a strong indication that it will favour partnership bids for around 80% of the funding available
Indicated that 31 bids for social housing grant under the current £200m New Partnerships in Affordable Housing (NPiAH) programme - the first Housing Corporation funding programme to be opened up to both the private and RSL sectors - have been shortlisted. The shortlisted bids total in excess of £850 million, giving the Housing Corporation a wide choice of potential programmes. The full breakdown of the shortlisted bids is as follows:
· 15 single Entity bids- made up of 7 RSL's and 8 Non RSL's
· 15 consortium bids- 8 of which were mixed, 5 which were RSL's and 2 that were Non RSL's.
· 1 bid was from a special purpose vehicle (SPV), a dedicated company established for the sole purpose of the NPiAH initiative
Announced its intention to commission a review of the regulatory, administrative and inspection requirements placed upon RSLs with a view to reducing their regulatory burden.
Confirmed its commitment to the Eco-Homes “Very Good” standard for all the homes to be delivered under its 2006-08 funding envelope.
All press releases on these announcements can be viewed at http://www.housingcorplibrary.org.uk
Buy-to-Let regulation falls between Treasury and the FSA
The Treasury and the Financial Services Authority (FSA) have clashed over who should regulate so called “get-rich-quick” buy to let schemes. The Treasury said: “Industry has raised concerns with us about the activities of certain investment clubs and we have relayed these concerns to the FSA. We are confident that the FSA will look into this issue very closely. We do not believe at this stage that there is any need for additional regulation.” However, the FSA said: “The only way the FSA can take over regulation of any financial services is if the Treasury orders it to do so…We can’t look into something we don’t regulate. It’s like asking us to look into whether the contents of baked bean tins are what they say on the tin.” (Financial Times)
Research – transatlantic perspectives on mixed communities
The Joseph Rowntree Foundation has published research comparing UK policy on creating mixed, sustainable communities with policy approaches in the USA. Two key summary findings are that:
Evidence suggests that efforts to build new socially and economically mixed communities “should proceed from areas of market strength, avoid extreme physical segregation of subsidised and market-rate households, and include a moderate-income “tier” of households to reduce differences between the extremes.”
“incremental improvements in the most severely deprived neighbourhoods may fail to catalyse the broader market forces on which regeneration programmes depend. Approaches ….[which replace] the nation’s most distressed social housing with well-designed, economically integrated communities, may have lessons for strategies aimed at narrowing the wide gap between these places and the rest of the nation.”
Summary findings of the report can be downloaded from http://www.jrf.org.uk
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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