A weekly news summary by Pierre Williams, the HBF's head of media, covering all aspects of the housebuilding industry. Available to members only.
Redrow Unveils the £55,000 Home
Redrow has thrown down the gauntlet to the rest of the housebuilding industry by announcing a new range of homes aimed at first time buyers with prices starting from just £49,995. The launch of its “Debut” range more than matches John Prescott’s demand that the industry cut costs to provide homes for under £60,000. While Prescott believes three-bed homes can be built and sold for under £60,000 if developers are provided with the land and necessary infrastructure for free, Redrow’s Debut range takes a new approach in that it does not rely on government-donated sites. However, whilst its one-bed homes start well below the £60,000 threshold, its three-bed Debut range starts at £109,995. Redrow says its use of MMC is the key to cutting costs without sacrificing quality. The steel-frame Debut range will be built largely off-site, cutting on site completion times to as little as three to four weeks. The homes will be sold on a shared equity basis with Redrow keeping a 10% stake but giving buyers the option of buying this back over 10 years, interest-free. The company will also manage the maintenance of communal areas. Debut kicks off with a 103-unit development in Rugby. CEO Paul Pedley said of Debut: “The more we can manufacture off-site the better, because we can then therefore increase quality.” (all media)
HBF Note: Redrow’s bold move might have raised some eyebrows in the rest of the industry but it fits in well from both a political and potential marketplace viewpoint. Lenders seem happy as it eliminates the potential problems of having market homes on publicly-owned land and the media is impressed. As the FT puts it: “Nothing beats being first to the moral high ground – especially when it is going to make you money as well. For the past few years Redrow has faced down investor gripes about the small annual loss it has made on its steel-frame operation but the new Debut range could not be built without it. And without a similar framing operation, other housebuilders will find it difficult to match Redrow’s cheaper build costs.”
Bank Pegs Rates Once More
Although the Bank of England’s Monetary Policy Committee held interests rates at 4.75% for the seventh consecutive month, speculation that they will rise again in the near future continues apace. A large number of economists believe this week’s decision will be only a temporary respite with a quarter-point rise possible in April but more likely in May. The CBI has warned that such a decision would choke off the recent but modest recovery in the manufacturing sector but renewed confidence in the housing market is adding pressure for a rise. (All media)
HBF Note: Members of the Times’ “Monetary Policy Committee” this week voted five to four for a quarter-point rise. And while the real MPC has clearly not concurred, it gives a flavour of the closeness of the decision.
Cabe Under Renewed Pressure
The government’s building design watchdog, Cabe, is facing new accusations of lack of accountability just months after its Chairman, Sir Stuart Lipton - boss of property company Stanhope - resigned amid allegations of potential conflicts of interest. This week, the Commons’ cross-party Housing, Planning and Local Government Committee renewed claims of Cabe’s lack of transparency and ongoing potential conflicts of interest among its commissioners. Some witnesses to the inquiry regard Cabe as a “self-serving clique”. The report also accused Cabe of concentrating too much on new developments and said it should focus more on conservation issues, although it said it should play a greater role in overseeing design quality of low-cost housing developments and PFI projects. (Times)
HBF Note: Interesting stuff. Readers might remember Cabe’s big attack on housebuilders last year with the claim that the vast majority of new schemes were “mediocre”. This was successfully rebuffed by HBF when we pointed out their design “audit” didn’t even ask the owners of these new homes what they themselves thought of the design of their homes.
Brown to Approve Reits in Budget
The Chancellor will finally give the go-ahead to American-style real estate investment trusts in next week’s budget, the Sunday Times has claimed. The Treasury will soon release details of its second consultation paper on the issue, giving details of how tax-efficient Reits will be structured. It is thought that following industry representations, these trusts will not be as prescriptive as initially feared and the announcement of their go-ahead should boost shares throughout the property sector.
McCarthy & Stone to Announce Healthy Results
McCarthy & Stone has announced a trading update ahead of the official announcement of its half-year results to the end of February 2005. The group achieved 792 unit sales with average sale prices of £164,600 – 16% higher than the same period of last year. Like other housebuilders, forward reservations are comfortably ahead of last year despite a “challenging” last six months. In recent weeks it said the market had strengthened and with more developments underway, the Board expects to report “satisfactory” results in April.
North West Economy Booms
The North West’s economy has made a strong start to the year. Private sector growth has grown for the 22nd consecutive month and so far this year it is the country’s second fastest growing economy after London.
HBF Note: This is a useful new tool to use in the fight against the expanding new homes moratorium in the region. If the North West wants to carry on booming then it will need to provide the new homes needed to make this happen.
Estate Agency Casualties Follow Softening Market….
Veteran London estate agency Chestertons has collapsed and Countrywide, the UK’s largest estate agency, is feeling the heat as the housing market softens. As a result of a sharp fall in house moves at the end of 2004, Countrywide has closed 35 of its 1,200 branches but is “cautiously optimistic” that a rebound in buyer confidence at the start of this year will halt any further damage. Chesterton’s, however, was unable to survive. However, its losses stemmed from its commercial property sector and not London’s residential market, which it said was “holding up well”. (All media)
HBF Note: That it was the commercial sector that sealed Chesterton’s fate, was not of course reflected in the headlines that painted a bleak picture for the housing market.
Pierre Williams,
Head of Communications,
House Builders Federation,
March 11, 2005