A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Governor hints that rates may not be cut as early as the financial markets expected
Bank of England Governor, Mervyn King, reined in expectations of future rate cuts in a speech at Salts Mill, Bradford. The financial markets had been expecting a 25 basis point cut later this year and a further cut early next. However, Mr King highlighted three upside risks to inflation, the rapid growth of broad money in the UK, the potential ending of downward pressure from falling import prices and the potential rise in labour costs, while citing only one downside risk, the immediate outlook for consumer spending.
Mr King commented: “Judging the balance of those risks is a difficult task, but what matters most is that the Monetary Policy Committee will react promptly to whichever of these risks appears to be materialising in the months ahead.” (http://www.bankofengland.co.uk)
Inflation unchanged in April
The Bank of England’s target measure, the Consumer Prices Index (CPI), registered no change in the annual rate of inflation at 1.9% in May, still slightly below the middle of the Bank’s target rate of 2.0% +/- 1.0%. The former target measure, RPIX (which excludes mortgage interest payments), fell from 2.3% to 2.1%. (http://www.statistics.gov.uk)
Labour market remained robust in April
Average earnings including bonuses were 4.6% higher in the three months to April compared to the same three months a year ago, up from 4.5% in the three months to March. Once bonuses are excluded, earnings growth remained unchanged at 4.1% in the three months to April. The ILO measure of unemployment fell by 15,000 people over the three months to April from the preceding three months, although the unemployment rate remained unchanged at 4.7%. (http://www.statistics.gov.uk)
Retail sales flat in May
The volume of retail sales edged up by 0.1% from April to May, although little should be read into month-to-month changes due to the volatility of the data. Sales volumes rose by 0.3% in the three months to May compared to the preceding three months, a modest increase in this measure, which had shown a fall in the early part of the year. Sales were 1.3% higher in comparison to the same month a year ago. (http://www.statistics.gov.uk)
Political Events
Sir Gus O' Donnell appointed Secretary of the Cabinet
The Prime Minister approved the appointment of Sir Gus O' Donnell, currently Permanent Secretary at HM Treasury, to be Secretary of the Cabinet in succession to Sir Andrew Turnbull KCB CVO on his retirement this summer. (http://www.politics.co.uk)
HBF Comment: This appointment should further strengthen the understanding of current housing supply issues at the heart of Government.
New Skills Academy Chair announced with UK to provide platform for common European code for sustainable communities
Deputy Prime Minister John Prescott named Professor Peter Roberts OBE as the Chair of the UK's new Academy for Sustainable Communities. Professor Roberts said: "This is a tremendous opportunity to be able to contribute to the creation of sustainable communities and to the development of the skills and knowledge required to ensure their long-term future. The real test of the Academy will be the quality and extent of the additional capabilities that it can mobilise and deliver. Helping communities to create better places is a massive task, but I am sure that the Academy can help make a real difference."
Mr Prescott added that the Academy would be an international centre of excellence and that the UK Presidency of the EU would provide a platform for discussing a common European code for sustainable communities. Mr Prescott announced that he would be hosting a Ministerial Informal meeting in Bristol on 6th and 7th December 2005, which would focus on creating better places to live, drawing on examples from across Europe. (http://www.odpm.gov.uk)
Company News
Barratt urges low-cost sales direct to key workers
Barratt has proposed a widening of the definition of social housing to tackle affordability problems. Barratt Group Chief Executive David Pretty said: “Under our proposal, housebuilders would contract to sell a proportion of their new homes at well below market value, allowing for key workers – who are critical to the fabric of society – to realise their home ownership ambition… This would have a profound and almost instant effect on the social housing crisis that is staring us in the face”. (http://www.barratthomes.co.uk)
Kier buys Ashwood Homes for £23.5m
Construction and house building company Kier Group bought Lincolnshire and Cambridgeshire builder Ashwood Homes for £23.5m, following their purchase of Tudor Homes last year, who covered the same area. Kier Chief Executive John Dodds commented: “This transaction, which is part of our ongoing strategy to expand and strengthen the residential division, has provided us with a good opportunity to acquire land off market in areas in which we are currently operating and will provide a return on our investment immediately. It is similar in nature to the Tudor Homes transaction completed last year which has proved to be very successful.” (http://www.kier.co.uk)
Housing market
ODPM reports continued slow down in prices in April
The Office of the Deputy Prime Minister (ODPM) announced that average mix-adjusted house prices fell by an unadjusted 0.8% in April, causing the annual rate of increase to drop quite sharply from 12.6% in March to 6.9%, an annual growth rate very much in line with the other house price indices. The ODPM noted that the monthly fall was mostly caused by a fall in the price of detached houses, which dropped 3.5% over April. (http://www.odpm.gov.uk)
Surveyors report further price falls
The Royal Institution of Chartered Surveyors housing market survey for June showed a higher proportion surveyors reporting falling prices over the month that at any time since November 1992. A balance of -49% of those surveyed reported that prices had fallen over the three months to May, a deterioration from -41% in the three months to April.
However, RICS commented that: “As interest rates may be near a peak and possibly set to fall, surveyors are anticipating some turnaround in sales activity, with confidence the highest since last November.” (http://www.rics.org.uk)
Other News
Climate Change and Environment Minister launches UK-Sweden Better Buildings Initiative
A new UK-Swedish partnership to promote more sustainable building and construction was launched by Climate Change and Environment Minister Elliot Morley. Mr Morley was in Sweden for the start of the Sustainable Construction Initiative, designed to highlight the use of environment-friendly technology and practices, bringing together current examples of joint UK-Sweden work on building and refurbishment and stimulating new projects. (http://www.wired-gov.net)
20% fewer people are becoming homeless
Figures released by the Office for National Statistics revealed that the number of people becoming homeless has fallen by 20% compared to last year. Homeless acceptances were down 7,000 compared to a year ago. Yvette Cooper, Minister for Housing at the Office of the Deputy Prime Minister, said: “This is very welcome progress. It hasn't happened by accident. New local strategies and £200 million of investment in preventing homelessness are making a real difference. Simple things like lending families the money for the rent deposit they need can stop them being stuck without a home.” (http://www.odpm.gov.uk)
Number of Britons buying property abroad rises
Figures from the Office for National Statistics revealed that the number of foreign homes owned by British citizens had risen to 231,000 last year, from just 104,000 ten years earlier. 27% of this total was in Spain and France accounted for a further 20%. The value of the homes is estimated to have doubled to just over £23 bn in the last 5 years. (Times)
English Partnerships extends Design for Manufacture competition deadline
English Partnerships has decided to extend the deadline for stage two of the Design for Manufacture competition, in response to shortlisted teams' concerns about the tight timescale for submitting detailed entries. Trevor Beattie, EP director of corporate strategy, broke the news to Housebuilder. He said: "Bidders have told us they would like more time - not that they can't meet the deadline, but that this would enable them to submit better quality bids.
The 33 shortlisted teams are currently working up their proposals for homes that can be built for £60,000; the winning entry will have the opportunity to develop homes on land provided by EP. (http://www.englishpartnerships.co.uk)
Planning guru calls for greenfield building
Sir Peter Hall, a government advisor and planning expert, has called for the use of more greenfield sites to tackle the housing shortage. In a report for the Town and Country Planning Association Hall said that redundant agricultural land should be released for development since 9% of farmland in the south east receives European money to be left empty to prevent over production.
Hall said the land would provide more than enough space to meet the current need for affordable housing. “The plain conclusion is that we have plenty of land for building, almost wherever we like.” Hall also criticised the current policy of building housing in higher densities. “We should be seriously concerned that we shall be developing all sorts of inappropriate sites, bad for people who live in them, bad above all for their children if they have them,” he said. (Guardian)
Property sharks smell green belt blood say rural campaigners
Sir Max Hastings, president of the Campaign to Protect Rural England (CPRE), has accused the government of “nibbling hungrily” at greenbelt land as it tries to provide more housing in the south east. “Speculators are selling plots within greenbelt land, holding out to buyers the prospect that a government which is already nibbling hungrily at the green belt in several areas will soon allow planning consents to be given in others. These circling sharks are disturbingly confident that Whitehall will throw them raw meat because there is already blood on the water.”
An ODPM spokesperson said: “The government is committed to maintaining and increasing the greenbelt in all regions. Since 1997 the total area of green belt land in England has increased by around 19,000 hectares, with around a further potential 12,000 hectares proposed in emerging local plans.” (http://www.cpre.org.uk)
HBF Comment: England has 1.68 million hectares of Green Belt, 13% of its total land area. In 2003, 0.015% of Green Belt land was developed for housing, of which 60% was previously developed land.
Paul Samter
Senior Analyst - Economic and Policy Affairs
House Builders Federation