A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Interest rates unlikely to be cut again
The Bank of England’s target measure of inflation, the Consumer Prices Index (CPI), rose to 2.3% in July, up from 2.0% in June, and is now above the middle of the target range of 2.0% +/-1.0%, a development which surprised economic commentators. An increase in the price of petrol, due to higher crude oil prices, was noted as the factor having the largest upward impact on inflation. This is the highest that this measure of inflation has hit in the eight years for which it has been recorded. (www.statistics.gov.uk)
The jump in inflation caused the financial markets to reduce expectations of another rate cut, a development that was re-enforced by the release of the minutes of the Bank’s 3/4 August Monetary Policy Committee (MPC) meeting. It had been expected that the vote for the 25 basis point decrease in rates would have been near unanimous amongst the nine MPC members. In fact, the vote was 5:4 in favour of a cut and, for the first time since the Bank was granted independence in 1997, the Governor (Mervyn King) was in the minority. The markets interpreted this as being yet further evidence that the MPC is likely to leave rates on hold for the foreseeable future. (www.bankofengland.co.uk)
Earnings growth rises marginally, but so does unemployment
Headline earnings growth edged up by 4.2% in the three months to June compared to the same three months last year, up from 4.1% in the three months to May. Once bonuses are excluded, earnings growth was unchanged at 4.0%. The ILO measure of unemployment edged up by 0.1% in the three months to June to 4.7%, while the claimant count measure rose by 2,800 in July, leaving the rate unchanged at 2.8%. (www.statistics.gov.uk)
Consumer spending fairly stable
Despite a seasonally adjusted 0.3% fall in retail sales in July, the Office for National Statistics described the trend of sales as on an “upward trend” as the annual rate of sales growth rose to 1.8% from 1.2% in June. The monthly fall came on the back of a rise of greater magnitude in June. (www.statistics.gov.uk)
Political Events
Government to bring more long-term empty homes back into use
The ODPM announced the launch of a new consultation on how Empty Dwelling Management Orders (EDMOs), which aim to get empty homes back into use, should operate. EDMOs will enable councils to take over temporary management of longer term unoccupied houses and flats so they can be let out to tenants. Properties will revert to their owners on an agreed date or sooner if the owner so requires - provided due notice is given and arrangements to repay any reasonable costs incurred by councils are settled. EDMOs are included in the Housing Act 2004 and are designed to operate as a back up to existing services already provided by local authorities, such as leasing arrangements. (www.odpm.gov.uk)
Housing market
RICS report modest improvement in the market
The Royal Institution of Chartered Surveyors (RICS) July housing market survey saw a further improvement in the balance of surveyors reporting falling house prices. A balance of –36% of those surveyed reported that prices had fallen in the three months to July compared to the previous three months. This balance has improved from –46% in the three months to May and –41% in the three months to June.
Average sales per surveyor edged up very modestly from 22 for the three months to June to 23 for the three months to July. There was also a rise in new buyer enquiries for the second consecutive month. The balance of surveyors reporting a rise in new instructions fell to the slowest pace in over a year and RICS note that this suggests “that selling pressure is tapering off.” (www.rics.org.uk)
Small fall in asking prices fall
Website Rightmove reported that asking prices fell by 0.2% in the four weeks to 6 August, but the annual rate of price growth actually rose from 0.2% to 2.1%, due to a weak month a year ago. Rightmove’s commercial director Miles Shipside commented: “In some ways this is quite a healthy market. If buyers are around and making sensible offers, then estate agents can give clear evidence to their sellers on the correct price. The market is finding a new level of sustainable pricing, and sellers appear to be coming to terms with it by lowering their ambitions.” (www.rightmove.co.uk)
Other News
First half buy-to-let figures
The CML reported that buy-to-let lending slowed in the first half of 2005. Lenders advanced £9.9bn in new buy-to-let mortgages, slightly up on the second half of 2004. However, the number of new loans fell by 4% in the first half to 94,000, although this is a considerably smaller fall than the 18% drop in the second half of last year.
The total size of the buy-to-let sector was worth £63.5bn at the end of the first half and there are 632,000 such mortgages, 7% of all outstanding mortgage debt. (www.cml.org.uk)
Property websites widen gap between rich and poor says foundation
The Joseph Rowntree Foundation warned that property websites increase the gap between rich and poor. Its researchers found that information about postcode districts on things such as schools, crime rates and other amenities was becoming increasingly sophisticated. The foundation said this facility could become a tool for people to select areas where their neighbours were most like themselves which could lead to a segregated society.
Roger Burrows, who led the research team from the universities of York and Durham, said: “We already have a digital divide in Britain between those whose internet access makes them information rich and those whose inability to afford computers or fast web connections makes them information poor. It seems only a matter of time before the kind of powerful neighbourhood search sites available in the US start to reinforce the divide between the more and less prosperous parts of the UK.” (www.jrf.org.uk)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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