A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Retailers continue to struggle…
The British Retail Consortium (BRC) reported that retail sales in September were 0.8% lower than a year earlier on a like-for-like basis, and 3.1% higher on a total sales basis. BRC Director General Kevin Hawkins commented: “While the underlying trend does not appear to be getting any worse, it is still too soon to say that things are improving. Next month’s figures will give us a better read on what is happening on the high street, but from now on the comparatives get softer in the months leading up to Christmas. The case for a reduction in interest rates is now as pressing as ever.”
(http://www.brc.org.uk)
…as the labour market holds steady
Figures from the Office for National Statistics showed that the labour market remained stable in the three months to August. The ILO defined measure of unemployment edged down by 7,000 over the three months, although the rate remained unchanged from the preceding three months at 4.7%. The claimant-count measure of unemployment rose in September, as it has done every month this year, by 8,200, although the rate remained unchanged from August at 2.8%.
Earnings data also showed little change with earnings including bonuses up 4.2% for the three months to August compared to the same period a year earlier, and earnings excluding bonuses up 4.0% on the same basis. Both of these measures were unchanged from the three months to July.
(http://www.statistics.gov.uk)
… while the Governor dampens expectations of further rate cuts
Bank of England Governor, Mervyn King, hinted that he was unconvinced of the case for further rate cuts in a speech at the CBI North East annual dinner. Mr. King reiterated his view that the business cycle has not been abolished and that it is not the Bank’s job to “control the short-run path of output.”
Mr King outlined the consequences of the rise in the price of oil, while noting that “no more than one half of the pick-up in inflation can be explained by oil prices.” He said that “higher oil prices affect not just current inflation but also both demand and potential supply and hence future inflation.” Mr King also pointed out that much of the rise in inflation can be attributed to more and more spending on services, which have seen a higher inflation rate than that of goods. It should be noted that the Governor voted too keep rates unchanged when the MPC decided to raise the repo rate in August.
(http://www.bankofengland.co.uk)
OECD cuts growth forecasts for the UK, praises the stability and resilience of the economy and calls for housing supply to become more responsive
In line with most other forecasting bodies, the Organisation for Economic Development (OECD) cut its forecast for UK economic growth this year to 1.7% (down from a forecast of 2.4% made six months ago), while predicting a rebound to 2.4% next year. The OECD commented that: “The stability and resilience of the economy has been impressive and labour and product markets are among the most flexible in the OECD, but structural economic performance judged against a range of indicators can be further improved.”
The OECD also suggested that the housing market continues to exert a strong influence on aggregate consumption, although it said that the possibility of a sharp drop in consumption, through a “pronounced drop in house prices”, had diminished. The OECD called for reform to “make housing supply more elastic to damp future housing market cycles”, saying that “in response to the recommendations of the Barker Review, the government should reform the planning system to increase its responsiveness to housing demand as well as providing greater incentives for local authorities to meet housing growth targets.”
(http://www.oecd.org)
Political Events
ODPM projects that only three in ten of today’s young will be unable to afford to buy their own home unless more houses are built
The ODPM announced preliminary results of part of their response to the Barker Review and projected that only three in ten of today’s ten year olds will be able to afford to buy their own homes unless house building numbers increase. The ODPM claim that the proportion of couples in their thirties who will be able to afford to buy is set to fall to around a third by 2026, from around a half today and two thirds in the late 1980s. Commenting on the figures, Housing and Planning Minister Yvette Cooper said: "For the sake of today's ten year olds we need to start planning new homes for the future right now. It isn't fair if people's chances of owning their own home in the future depends on whether their parents or grandparents were homeowners before them."
(http://www.odpm.gov.uk)
Caroline Spelman, Conservative Shadow Secretary for Local Government and Communities commented: “Labour's soaring stealth taxes on property - including stamp duty hikes and council tax - have made it less affordable for people to own their own home, and have contributed to a whole generation being kicked off the first rung of the housing ladder.”
ODPM Select Committee to launch new enquiry into “Affordability and the Supply of Housing”
The ODPM Select Committee has started an enquiry into “Affordability and the Supply of New Housing”. The enquiry will look into several issues including the potential benefits of and scope to promote greater ownership, the economic and social impact of current house prices, the relationship between house prices and supply, the scale of the government’s plans to boost housing supply and how the planning system should respond to the demand for housing for sales. Written evidence to the committee is to be submitted by 8 November.
(http://www.parliament.uk)
HBF Comment: HBF will make a substantive input to the enquiry and is very likely to be called to give evidence in person. The enquiry will also attract submissions from many other parties and will provide another forum in which issues around Barker, revision of PPS3 and Planning Gain Supplement are debated.
Company News
Your Move owner splashes out again
Lending Solutions, the owner of the Your Move estate agency chain, has bought Reeds Rains, a rival operator, for £22 million. Lending Solutions bought Your Move and e.surv, the property valuer, from Norwich Union and has bought the 130 network branch Reed Rains to capitalise on the consolidation in the industry expected to result from the government’s home information pack initiative.
From January 2007 house sellers will be required to provide potential buyers with a pack including property valuation and a structural survey. Sellers will look to estate agents to help put them together. The chief executive of Lending Solutions, Simon Embley, said: “The home information pack creates tremendous potential for estate agents, surveyors and conveyancers to work together.” He added: “The acquisition will give Reeds Rains much greater capacity to produce home information packs.” (The Times)
Housing Market
Government house price figures paint a similar story to Nationwide and Halifax
The Office of the Deputy Prime Minister’s (ODPM) August house price data showed a very similar story to that seen in the Halifax and Nationwide indices. The ODPM’s data is not seasonally adjusted so little can be read into the fact that prices were unchanged over the month, but the annual rate of house price growth fell from 4.0% in July to 2.8% in August, which compares to August figures of 2.3% from Nationwide and 2.5% from Halifax. Regionally, annual price growth remained faster in the north of the country than the south, and the South East saw a small decline (-0.4%) in prices over the year.
(http://www.odpm.gov.uk)
Other News
JRF Study reveals that 1.25m families fall into gap between housing benefit and earning enough to buy their own home
Research by Steve Wilcox of the University of York for the Joseph Rowntree Foundation found that there are 1.27m (22%) younger households, aged 20-39, in the country who earn too much to qualify for housing benefit but not enough to buy a house valued at the lower decile of prices. The report classified families that fall into this gap as being in the Intermediate Home Market (IHM). Of the 40 local authorities that have the highest proportion of young households in the IHM, 13 are in London, 14 in the South East, 12 in the South West and 1 in Yorkshire & Humberside. The report concludes that the case is made for “a very large potential market for IHM schemes to bridge the divide between social renting and home ownership.”
(http://www.jrf.org.uk)
Proportion of young households buying a home falls
Figures from the ODPM’s Survey of English Housing show that the proportion of households under thirty with a mortgage has fallen from 40% in 2000 to 36% in 2004, down from 46% ten years ago. 23% of first-time buyers now rely on a gift or loan from family, compared to just 4% 25 years ago. The Survey also showed that the home ownership rate has remained at 71% in 2005 and that there are 500,000 households in England classified as overcrowded, 2.5% of all households, a figure which rises to 6.5% in London.
(http://www.odpm.gov.uk)
Thames Gateway Development Corporation given remit over major applications
The new London Thames Gateway Development Corporation (LTGDC) will gain strategic planning powers from October 31. The body will effectively become the local planning authority (LPA) within a designated area in the Lower Lee Valley and London Riverside, from Beckton to Rainham, with the power to determine all large scale planning applications within this. Local authorities will be left to make decisions on smaller scale schemes.
Housing and Planning Minister Yvette Cooper announced the news: “The transfer of planning powers for strategic applications will enable LTGDC to make a real and positive difference to local communities on Barking and Dagenham and Havering, bringing business investment, increased employment and improved community facilities. Although LTGDC will not hold authority over the main Olympic sites, its work in the neighbouring communities in Lower Lea Valley will be of vital importance when ensuring that this area in East London will be truly sustainable for future generations."
(http://www.odpm.gov.uk)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
For daily news updates for the housebuilding industry from Housebuilder magazine go to www.house-builder.co.uk