A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Inflation edges up….
The Bank of England’s target measure of inflation, the Consumer Prices Index (CPI), edged up to the mid point of the Bank’s target range at 2.0% in June, up from 1.9% in May. It is important to note that in the last Inflation Report released by the Bank, the Monetary Policy Committee forecast that inflation would rise modestly above 2.0% in the second half of 2005 before falling back below target after this. (http://www.statistics.gov.uk)
… but earnings growth slows
Average earnings growth including bonuses rose by 4.1% in the three months to May, compared to the same three months a year earlier, down from 4.6% in the three months to April, as the surge in private sector services earnings (most likely due to large city bonuses) dropped out of the annual comparison. Once bonuses are excluded, earnings growth saw a much more modest fall from 4.1 to 4.0%.
The ILO measure of unemployment fell by 4,000 over the three months to May, leaving the unemployment rate unchanged at 4.8% from the preceding three months, but slightly higher than the 4.7% seen in the second half of 2004. The claimant count measure of unemployment rose by 8,800 over June, leading to the unemployment rate, according to this measure, edging up from 2.7% to 2.8%. The claimant count has risen in every month of 2005. (http://www.statistics.gov.uk)
Political Events
HBF meeting with ODPM on Housing Supply
HBF, represented by Rob Ashmead (Chief Executive of HBF), Malcolm Harris (Chief Executive of Bovis) and Paul Pedley (Chief Executive of Redrow) met Yvette Cooper MP, Minister for Housing and Planning, on Tuesday 12 July to discuss how HBF and its members could work with Government to increase housing supply. HBF proposed regular and structured discussions with Ministers to advance agreement on the measures that need to be taken and the public argument in favour of more homes. We are following up the meeting with a further letter to the Minister.
Following the meeting, Ms Cooper commented in a speech at the Institute for Public Policy Research on Wednesday 13 July that: “It is certainly true that we need to build more social housing, and more shared ownership housing. But unless this is part of building more housing across the board, we will see more people priced out of the market in the area where they work or where they grew up, as well as greater pressure on social housing thanks to problems of affordability and pressures on the private rented sector too. Those who set themselves against new housing growth need to be clear; the message they are sending to first time buyers and those without homes of their own is that ‘we don't want to help you and we don't want you to live round here.’” (http://www.odpm.gov.uk)
Government initiative to reduce the burden of Whitehall Controls on local authorities
A project to implement better regulation, tackle unnecessary bureaucracy and make it easier to deliver local services was announced by Local Government Minister Phil Woolas. The project, which will be jointly run by the ODPM and the Cabinet Office, aims to identify and evaluate consent regimes - where councils need to ask Government permission to take key decisions on local issues - with a view to reducing burdens on local authorities.
John Hutton, Chancellor of the Duchy of Lancaster, who will oversee the project alongside Phil Woolas, said: "This is an important project in the Government's drive to reduce burdens on frontline staff and improve public services. The current consent regime process can cause delays in Council decision-making in areas such as housing and planning. By streamlining consent regimes we will empower staff to make decisions locally which will result in faster service delivery to the public." (http://www.odpm.gov.uk)
ODPM Select Committee members announced
The following MPs have been elected to the Office of the Deputy Prime Minister Housing, Planning, Local Government and the Regions Select Committee: Sir Paul Beresford, Mr Clive Betts, Mr John Cummings, Mr Jim Cunningham, Mr Martin Horwood, Mr Mark Lancaster, Anne Main, Mr Bill Olner, Dr John Pugh, Alison Seabeck and Dr Phyllis Starkey.
HBF will be seeking to meet key members of the ODPM Committee as part of its external affairs programme.
Prescott pledges to improve planning system
In a speech at the Town & Country Planning Association Conference, Deputy Prime Minister John Prescott lauded the government’s planning policies on housing. He also pledged to improve the planning system: “Too often in the past, the planning system has failed to respond to changing demand for homes in different places. We want plans take better account of housing markets and need, and reflect the needs and circumstances of different areas. We want plans that are forward looking and provide enough developable land to create sustainable communities. We want local authorities to be more proactive about good quality development. That means we want them to tackle the constraints which hold back difficult, but appropriate, sites from development. The Government intends to publish in the autumn a draft new Planning Policy Statement on Planning for Housing to help deliver sufficient and appropriate residential development to create mixed and sustainable communities.” (http://www.odpm.gov.uk)
South East Regional Assembly passes regional plan
The South East regional plan, which proposes to build 28,900 homes a year for the South East over the next 20 years, was passed by the South East regional assembly. (http://www.southeast-ra.gov.uk)
Company News
McCarthy & Stone give profit warning
McCarthy & Stone gave a rather downbeat trading update to the stock market, noting that the housing market had remained difficult and forecasting fewer sales than a year earlier. The statement commented: “The Board expects a lower level of unit sales for the full year to 31 August 2005 than the 2055 unit sales achieved last year. It is difficult, at this stage, to estimate how much lower the level of completions might be but it could be of the order of ten per cent.”
As a consequence: “The Board anticipates that pre-tax profits for the full year will be lower than the £140 million which represents the mid-point in the current range of brokers' forecasts.” (http://miranda.hemscott.com)
Taylor Woodrow also see a more difficult market than last year
In their trading update Taylor Woodrow described a tougher market than last year, commenting: “We enjoyed a strong sales performance relative to a market which was much more difficult than in the first half of last year; total net reservations were down by 1%, from 3% more sites. Net reservations per site were down by 4%, which is significantly better than the market as a whole. Completions were down 17% at 3,194 (H1 2004: 3,869), despite having started the year with an order book that was down 32% on the previous year. The order book now stands at around £600m, 18% lower than at June 2004 (£733m).” (http://www.taylorwoodrow.com)
Bovis report a slower market too
In their update to the stock market Bovis Homes also noted a slower market with average sales price per square foot down 1.6% year on year. On the market in generally Bovis commented: “The UK housing market has remained steady during the second quarter of 2005 after a weak fourth quarter of 2004 and a quiet start to 2005. Consumers are showing caution, contributing to property transactions in England and Wales in the first quarter of 2005 being 24% lower than the corresponding period in 2004.” (http://www.bovishomesgroup.plc.uk)
Correction to reporting of Redrow results in last week’s summary
In last week's news summary, we mistakenly reported that Redrow's year-end operating margin is anticipated to be 17% "marginally lower than the 19.8% achieved in the previous financial year average."
In fact the 17% refers not to the year-end margin, but to Redrow's forward sales outlook, namely that "operating margins will continue the move towards the previously identified sustainable level of approximately 17%.”
Housing market
The ODPM reports a modest rise in house prices in May
The Office of the Deputy Prime Minister (ODPM) revealed that house prices rose by an unadjusted 0.5% in May, leading to a fall in the annual rate price growth from 6.9 to 6.0%. The annual rate of price growth for properties in London fell further from 2.7% in April to just 1.6% in May. This is broadly consistent with Halifax reporting annual price growth of 5.7% in May and Nationwide 5.5%. (http://www.odpm.gov.uk)
Other News
Welsh Assembly announces measures to increase affordable housing
The Welsh Assembly has announced a raft of proposed measures, which will be consulted on before being formalised, aimed at providing more people with affordable housing through changes to planning policy and guidance to increase the quantity of affordable housing provided through the planning system.
The proposals include an “Affordable Housing Toolkit”, to provide mechanisms for local authorities to increase the supply of affordable housing and a “Local Housing Assessment Guide”, which provides a common system for local authorities to calculate their affordable housing need. (http://www.wales.gov.uk)
Planning Inspectorate reports a reduction in the backlog in determining planning appeals
The Planning Inspectorate’s annual report revealed that the backlog in determining planning appeals has been slashed from 4,700 in November 2004 to around 600 this year. Planning Minister Yvette Cooper said: “I am encouraged to see that the Planning Inspectorate managed to reduce its backlog in appeals. The recent restructuring will also enable it to meet the demands of a rising workload both now and in the longer term. Over the past 4 years the number of appeals received has increased by over 38 per cent, putting pressure on timeliness; however it is welcome that most of the other targets were met.” (http://www.odpm.gov.uk)
Centex exec fears "Barker is on the back burner"
Some in the housebuilding industry are concerned that proposals made in Kate Barker's review of housing are not going to be implemented. Speaking at the PPS seminar Sustainable Communities Plan - All Change, Nick Smith, group land planning and design director for Centex UK, said: “We are worried the Barker initiative has been put on the back burner.” Smith fears that with more marginal seats following the general election local politicians will be reluctant to push through the number of houses recommended by Barker.
Speaking at the same conference, former housing and planning minister Nick Raynsford said: “Barker numbers will terrify those nervous about increased developments.” He told Housebuilder magazine : "Although the Barker report has been incredibly useful and a thorough analysis, numbers just won’t win the argument.” Raynsford said that people will warm to development if they are shown the success stories such as Greenwich Millennium Village and Woolwich Arsenal. He added: “I don’t believe the reduced majority will impact on the government’s commitment to the plans. The Olympics will add impetus to this growth.”
Leaking water could supply 11 million homes
The Daily Mail reported that water companies are losing almost a quarter of all water pumped into the mains pipes through leaks. The total loss for 2004/5 was put at 29 billion gallons, enough to supply 11 million homes. The water companies claim that they are struggling to cope with a crumbling pipe network that is up to 150 years old in places. (Daily Mail)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation