A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, the HBF's head of media. Available to members only.
Housing crisis worsens as household projections soar
New government figures show a massive increase in the projected number of households and demand for new housing. Across England, the number of extra households will rise from 150,000 to 188,600 a year over the next 20 years. The increase will be most acute in London, which will see 46,000 new households a year – an 80 percent increase on existing forecasts. The annual regional forecasts are: South East up from 32,900 to 33,900; South West up from 20,000 to 22,600; East up from 20,900 to 24,600; East Midlands up from 13,400 to 15,900; West Midlands up from 10,400 to 14,400; North West up from 11,800 to 15,500 and North East down from 3,400 to 3,000. Pierre Williams for the HBF highlighted the figures as providing even more incentive for government to ensure planning reform works to ensure delivery. (ITN, FT, trade press)
HBF note: Official statistics also show that the UK’s population is set to top 60 million by the end of this summer.
Johnson warns on supply in a softening market…
George Wimpey Group CEO, Peter Johnson, has issued a warning to government that, even if they were able, developers might not be able to greatly increase volumes if the market softens or falls. A principal business priority is to maximise shareholder value. Also, a policy climate in which government tells developers what to build, how much to build, where to build and when to build, might not fit too comfortably with shareholder expectations. Whilst promising to support the government’s worthy intentions to increase supply, Johnson indicated that planning policy changes were not strong enough to ensure delivery and that the mass of intervention was ill-conceived. He said: “We, not the planners are best able to decide what the market wants. Let us not repeat the central government driven mistakes of previous decades.” (Speech HB04)
HBF note: Good work. Someone needed to say it. Just how much the requirements of industry register in the ODPM mindset is difficult to fathom (zilch, probably). Market intervention in the form of planning restriction on numbers has been recognised as a problem. The solution? More intervention on numbers, type, tenure, location, design and timing!
…as developers reject paying for Crossrail
Developers have rejected government plans for them to help pay for the London Crossrail project with a development land tax. The consortium, including the Canary Wharf Group, British Land and Tesco, say it would be impossible to levy a fair tax on the uplift in property values after the new railway lines are built. They say such a tax would be arbitrary and unfair according to a pamphlet published by the Social Market Foundation. The property industry’s opposition to a tax on rising property values raises serious questions over how the government will afford Crossrail, estimated to cost £11.2 billion. Views vary, but the developers concerned suggest a levy on business rates would be a better option. (Times)
HBF note: Not just Crossrail of course. This raises doubts about the acceptability of any development land tax. And what if the projected uplift in values fails to materialise?
Booming Bovis warns on flat prices
Bovis expects prices to be flat over the next 12 months with growth of between zero and two per cent. But CEO Malcolm Harris has dismissed fears of a crash and welcomes the slowdown as a “positive effect” on creating a more sustainable level of house price rises. Warning that recent rate rises had done their job, Malcolm Harris added that improvements to existing stock were the main reason why the second-hand market had apparently recorded higher price growth than new. His comments came as Bovis announced excellent half-year results with a 46 percent rise in pre-tax profits on a 43 percent jump in turnover. Shares climbed 10p to 566.5p as it raised the dividend 21 percent to 6.4p. (BBC R4 Today, Times, Guardian, Express, Mail, Telegraph)
CML forecasts possible new price surge
Persimmon’s John White said it first a fortnight ago and now the Council of Mortgage Lenders agrees that a renewed surge in house prices is a distinct possibility if buyers sense interest rates have hit their peak. CML director general Michael Coogan, said: “Some commentators are already suggesting the boom is over but we would urge a note of caution. Not only is it too early to call but even with continued signs of a cooling in the market, there is still the possibility of a renewed surge early next year.” (Independent)
HBF note: The FT also is not confident that the boom is over. It says: “Like Roman seers who pored over the entrails of sacrificed animals, economists are probing each new piece of data from the housing market….but it is still too soon to declare the end of the cycle to be in sight and dovish noises from the Bank look premature…”
Bank leaves rates on hold
As expected, the Bank of England’s Monetary Policy Committee left base rates on hold at 4.75 percent at its rate-setting meeting yesterday. (All media)
McCarthy & Stone’s robust trading update
McCarthy & Stone anticipates reporting another very successful year when it announces its full-year results - to the end of August - in early November. The board will announce sales up 5.5 percent to 2,055 units, with average selling prices up 18 percent to £154,300. All regions performed well although the South East was affected by the cooling of the London market. (Sunday Telegraph)
Tax fears boost overseas housing investment
One-in-five sales of homes worth £1 million or more are due to the desire of their owners to move their assets abroad to avoid future tax rises. Estate agency chain, Hamptons, says 20 percent of sales at the top end of the market come from clients who want to downsize in Britain and concentrate their resources in larger homes overseas. This reflects concerns that the Chancellor could raise property taxes - especially Inheritance Tax - still further after the general election. The government has admitted that it is keen to close more “tax loopholes” after the election. (Sunday Times)
Housebuilders to claim direct social housing grant
Housebuilders wanting to go for social housing provision should get involved in the Housing Corporation’s “market testing study” for grant directly available to developers. As early as next year, £200m should be available to developers able to convince the Corporation that they can provide social housing at better value than housing associations. The government intends to allow private developers to bid for this cash in the Housing Bill currently going through parliament. The HBF’s Pierre Williams said: “Housebuilders believe they can produce more affordable housing for each affordable housing pound allocated, compared to much of the public sector. “ Ashley Lane, director of Westbury Partnerships, said: “We’re very aware that housing associations have development aspirations but we believe we are better placed to deliver to time, cost and quality criteria.”
Rural businesses suffer from housing squeeze
Rising rural house prices are hitting small businesses hard according to the Country Land and Business Association. Increasing numbers of firms are having difficulty recruiting staff who are priced out of these areas. The Federation of Small Businesses agrees. The Countryside Agency says average house prices more than doubled between 1998 and 2003 and the problem of affordability is exacerbated because rural incomes are an average nine percent lower than those in urban areas. (Telegraph)