A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Chancellor to resist pressure to end Britain’s 48 hour week opt out
In an address to the annual Amicus conference, Chancellor Gordon Brown told delegates that he would resist pressure to end Britain’s right to opt out from the working time directive, which requires that employees work no more than 48 hours per week. The Chancellor also warned that wage discipline in the public sector is essential to preserve macro economic stability. (http://www.hm-treasury.gov.uk)
Inflation stable in April
The Bank of England’s target measure, the Consumer Prices Index (CPI), saw no change in the annual rate of inflation in April after a relatively sharp jump to 1.9% in March, to remain almost exactly in the middle of the Bank’s 2.0% +/- 1% range. The Retail Prices Index (RPI) was also unchanged in April at 3.2%, while the former target measure RPIX (which excludes mortgage payments from the RPI) edged down from 2.4% to 2.3%. (http://www.statistics.gov.uk)
Average earnings growth moderated in March while unemployment was little changed
Official data revealed that average earnings including bonuses grew by 4.6% in the three months to March compared to the first quarter of 2004, a marginal decline from a rate of 4.7% in the three months to February. Once bonuses are excluded, earnings rose by 4.1%.
The ILO measurement of unemployment fell over the first quarter to 4.7%, down from 4.8% the previous quarter, although the claimant measure of unemployment rose by 8,100 in April. (http://www.statistics.gov.uk)
Modest rebound in retail sales
The volume of retail sales posted a modest improvement in April, rising by a seasonally adjusted 0.5% from March, to stand 2.7% higher than a year earlier. For the three months to April, sales rose by 0.2% from the previous three months and 2.7% compared to the same period a year earlier. (http://www.statistics.gov.uk)
New Parliamentary Bills
The government pledged to introduce two bills that will be of interest to the industry in the Queen’s speech. (http://www.publications.parliament.uk)
Corporate Manslaughter Bill
The Government is committed to reforming the law on corporate manslaughter. Proposals for reform, and a draft Bill, were published on 23 March 2005 for public consultation and Parliamentary pre-legislative scrutiny. The proposals offer a more effective sanction for holding companies and other organisations to account where they have paid little or no proper regard for the safety of their workers or members of the public. The bill would apply to England and Wales. The Government has said that the law should not require more than the proper application of existing health and safety standards.
Regulatory Reform Bill
The key aims of the regulatory reform bill are to enable a greater number of reforms to be delivered via Regulatory Reform Order (RRO), by removing some of the restrictions and constraints on the use of RROs. The Bill would also extend the scope of Regulatory Reform Orders to deliver non-controversial proposals for simplification and modernisation.
Furthermore, it will enable the implementation of uncontroversial law reform proposals, by means of a new order-making power (this power will be known as a 'law reform order’) and enable the implementation of some of the Hampton proposals to rationalise private sector regulators (and private sector inspections).
Chancellor Gordon Brown also outlined the government’s promise to reduce the regulatory burden on business at a speech to the CBI annual dinner, pledging to set out the exact details based on the Hampton review. (http://www.hm-treasury.gov.uk)
Housing Market News
RICS report a stagnant market in April
The Royal Institution of Chartered Surveyors’ April housing market survey recorded an almost unchanged balance of –40% of surveyors (after –39% in March) reporting a fall in prices over the month, the eighth successive monthly decline. RICS described activity as “flat again on post-election interest rate fears”. The level of new buyer enquiries was little changed over the three months to April, while the balance of surveyors reporting an increase in the number of properties coming onto the market rose from +22% in March to +26% in April. (http://www.rics.org.uk)
Rightmove report little change in house prices
Rightmove’s house price index saw a 0.3% rise from 10 April to 7 May, leaving prices 4.9% higher than a year ago, the lowest rate of annual increase since 1996. Rightmove comment: “We anticipate a 0% year-on-year rate of increase by July with little movement upwards until buyer affordability improves… There have been no sharp corrections, resulting in a ‘soft landing’ on prices.” Rightmove also commented that market transaction volumes could struggle to reach a recent low of 1.14m in 1995 and could even be below the 970,000 of 1974. (http://www.rightmove.co.uk)
NHF reports that house prices have reached eight times average pay
House prices in England have risen to almost eight times the average salary, research for the National Housing Federation shows. A recent MORI survey carried out for the federation, which represents 1,400 independent, not-for-profit housing associations in England, shows that 71 per cent of people agree that buying a home today means taking on too much debt. The federation's director of strategy, Liz Atkins, said: “The property market may be cooling, but for thousands of people it's too little too late.” (Daily Mail)
Other News
Government to introduce new rules on equity release
In a surprise move, the government announced plans to regulate equity release schemes in the Queen’s speech. The Institute of Actuaries estimate that there is £1,100 bn worth of untapped housing wealth owned by the over 65s and that 4.3m retirees could benefit from unlocking this equity. Last year the equity release market was worth £1.3 bn. Schemes for releasing equity are to be regulated by the Financial Services Authority, ensuring that these homeowners will be entitled to compensation in the event of mis-selling and that rogue advisors can be fined. (Financial Times)
CBI and Shelter attack Government’s failings on homes
An unprecedented alliance of the CBI and campaign group Shelter has attacked the government for failing to implement most of the recommendations of a key review, published a full 15 months ago, into why the UK builds so few homes. The new lobbying force, the Campaign for More and Better Homes, which also includes house builders, public sector union Unison, and the government's urban design watchdog Cabe, says Labour has made only 'limited progress' on three-quarters of the agenda mapped out by Kate Barker, a Bank of England monetary policy committee member.
“There is a huge danger that the momentum built up by the Barker report is being lost,” said Shelter's director, Adam Sampson. Michael Roberts, head of infrastructure at the CBI, said: “There's a concern particularly in the south east that the housing market is affecting business's ability to recruit certain types of staff.” (Observer)
Backlash against plans for new homes in the greater South East
“The backlash against John Prescott's plans for 200,000 more homes in the greater south-east - particularly the growth areas of the 40-mile Thames Gateway corridor, Milton Keynes and the south Midlands, the Stansted-M11 corridor and Ashford in Kent - cost Labour seats. It was no accident that the swing against the party was almost twice as high in these areas as in the rest of the country, with places from Milton Keynes to Northampton, Gravesham, Cambridge and Peterborough falling to the Tories; indeed, the new Tory MP in Kettering was part of a coalition campaigning against a big expansion of Northampton.” (Peter Hetherington in the Guardian)
HBF Comment: We will explore this further. The Guardian’s thesis may not be entirely correct since the Iraq effect was probably strongest in the marginal South East seats.
Royal Society response to Defra review of UK climate change programme
The Royal Society published its response to Defra’s review of the UK climate change programme highlighting that “sufficient scientific evidence exists to support urgent and deep reductions in national and global anthropogenic greenhouse gas emissions.” The Society noted that: “Part L of the Building Regulations has been an effective measure for reducing building energy consumption in the last two decades, but it has only a limited impact on the existing building stock. Dealing with existing stock should be seen as a priority.” (http://www.royalsoc.ac.uk)
Housing Corporation receive bids for Competitive SHG programme
The Housing Corporation announced that they have received 60 bids applying for social housing grant under the £200m New Partnerships in Affordable Housing (NPinAH), the first funding programme to be open to both the private and RSL sectors. At least 50% of bids had housing association input.
Housing Corporation Chief Executive Jon Rouse said: “This £200m initial programme represents a historic step change for the affordable housing sector, which has clearly demonstrated its enthusiasm for the challenge in this response to the opportunity.” (http://www.housingcorplibrary.org.uk)
Housing Corporation and National Housing Federation launch capacity model
A joint model launched by Housing Corporation and National Housing Federation will allow the Housing Corporation to assess the capacity of all housing associations who aspire to be lead partners for future development over a 30 year time-frame. The Housing Corporation said: “The model has been based on the five year forecasting which has long been a regulatory requirement for larger associations, and has been constructed in Excel to help ease the completion process. It has been designed to mimic existing business plans, not replace them, and will ensure greater effectiveness and transparency in Housing Corporation investment decisions.” (http://www.housingcorplibrary.org.uk)
Surrey tops nosey neighbours league
Website myhouseprice.com has found that Cobham is the nosiest place in England and Wales when it comes to finding out the cost of a neighbours house. The website, which uses information from the Land Registry to offer the details of more than 6.5 million properties nationwide, charges £1 to tell you how much the house down the road sold for and give you a report on how well the local property market is doing.
Cobham/Oxshott, where house prices average at £624,986, came top of the table with Virginia Water in Surrey, where the average price is £564,591, second. Cofounder of the website Dab Cookson said: “All of the areas that came out in the top 20 were expensive. These are people who have more to lose and gain from movement in the housing market. They are wealthy individuals who are likely to research an area before investing.” (Guardian)
Housebuilding Innovation Awards shortlist announced
The shortlist of developments in the running to win at Housebuilder and the HBF’s Housebuilding Innovation Awards 2005 has been announced. The awards aim to recognise companies showing a commitment to driving forward quality in new home delivery. More than 140 entries were received and 19 companies have been short-listed across the ten categories.
The shortlist can be viewed on Housebuilder magazine’s website: www.house-builder.co.uk Click on the Housebuilding Innovation Awards logo at the top of the homepage for the full list. Winners will be announced at a gala dinner at The Savoy on the night of September 7.
Homelessness in London on the rise
Figures released by the London Mayor’s office have revealed that the number of families recorded as homeless increased by more than 18,000 between December 2000 and December last year. This is a rise of 37%. Havering on the eastern edge of London saw the sharpest rise with an increase of 450% from 147 families in 2000 to 809 last year.
Adam Sampson, director of homelessness charity Shelter, said: “The growth in homelessness in London is a direct consequence of the failure to invest properly in housing. Bringing empty homes back into use is a perfectly laudable policy but only a partial solution: nothing short of a huge increase in the number of social houses for rent will solve London’s appalling homelessness problem.” (http://www.shelter.org.uk)
Pathfinder demolition plans come under renewed attack
Deputy prime minister John Prescott’s demolition plans in pathfinder areas have been further criticised after a television programme showed houses could be restored for little more than it cost to knock them down. An uninhabited house in Toxteth was renovated by a team of experts for Tonight with Trevor McDonald. It cost £24,000 compared to the £18,000 that demolition would have cost and the £100,000 that Prescott’s regeneration scheme would have incurred to replace it with a new home.
The house was in a poor state, riddled with damp, with no bathroom or central heating and cracked ceilings. But a structural survey showed the roof and walls were fine. New housing minister Yvette Cooper said refurbishment was being considered for some properties but that other factors needed to be considered. “If you have an area where there are terrace houses with no gardens there’s a limit to the number of families with kids who will want to live there. You have to look at mixes of housing as well as the quality of the property.” (Telegraph)
Housing benefit set to change
The government has pledged to replace housing benefit with a new flat rate allowance aimed at encouraging tenants to shop around for cheaper housing. The new local housing allowance is paid direct to the tenants rather than to their landlords. It is currently being tested in the private rented sector in 18 local authority areas. In the Queen’s speech the government said it would publish legislation to introduce the system nationwide in the private sector. It has promised to fully test the allowance in the social rented sector before extending it.
The allowance will be based on average local rents rather than actual rents charged. If tenants can find accommodation that is cheaper than the local rate they will be allowed to keep the difference. If it is higher they will have to make up the difference from other resources. Some are worried this will create ghettos of poor households in the worst housing. (Guardian)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation