A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Robust economic growth continues
The preliminary estimate of first quarter Gross Domestic Product (GDP) for 2005 showed a 0.6% rise from the fourth quarter, meaning the economy expanded by 2.8% from the first quarter of 2004. The main sources of growth over the quarter were business services and finances (up 1.4%) and government and “other sectors” (up 0.9%). Together, these two sectors account for almost half of GDP. (http://www.statistics.gov.uk/pdfdir/)
Inflation rose in March
The Consumer Prices Index (CPI) for March showed a comparatively sharp rise in the annual rate of inflation to 1.9%, up from 1.6% in February. The CPI, which is the Bank of England’s target measure of inflation, is now broadly at the mid-point of the target level of 2.0% (+/- 1.0%), although it has not exceeded 2.0% since May 1998. The Retail Prices Index (RPI) rose similarly from 2.1% to 2.4%, while the former target measure, RPIX (which excludes mortgage interest payments), was unchanged at 3.2%. (http://www.statistics.gov.uk/pdfdir/)
Retail Sales continue to slow
The volume of retail sales fell by a seasonally adjusted 0.1% between February and March, to stand 2.7% higher than a year ago. For the first quarter as a whole, sales rose by 0.3% compared to the previous quarter and were3.2% higher than the first quarter of 2004. (http://www.statistics.gov.uk/pdfdir/)
Election Round Up
HBF launches its own election manifesto
HBF launched its own manifesto at its “Barker: One year on” conference on April 18. Commenting on the manifesto, Rob Ashmead, Chief Executive of the House Builders Federation said: “Housing deserves its own manifesto. Getting housing provision right is a matter of national importance so today we are setting out the steps we believe are essential for the next Government to take.” (http://www.hbf.co.uk/)
Business and the great immigration debate
In an article in the CBI’s Business Voice magazine, Sunday Times Economics Editor David Smith outlined and commented on the Labour and Conservative positions on immigration and the need for immigrant labour.
The Conservatives propose that there should be annual limits (although no figure has been set) on three categories (migrants, asylum seekers and dependents) coming into Britain each year, and there should be a “points system”, with those wishing to work permanently having to obtain a certain “score”. Mr Smith commented that “The Conservative policy of setting an annual limit looks rigid. Forecasting can never be as precise as this would require.”
Labour has ruled out annual limits, proposing a four-tier point system for varying degrees of skills (e.g. in the top tier professions such as doctors would usually be able to come to the UK without a firm job offer). Mr Smith concludes that “Employers have no choice but to recruit overseas. The new rules could make that very hard and, with the prospect of any new system being very bureaucratic, we should monitor policy developments in this area closely - or risk some significant damage to the economy and business.” (Business Voice, April)
The CBI launch their election manifesto
The CBI launched their business agenda for the election, focusing on “Ten priority challenges for the next government.” The challenges are: Bring about a skills revolution, improve Britain’s transport infrastructure, Boost Britain’s competence in science and innovation, begin to tackle pensions crisis, work with business to address climate change, achieve meaningful deregulation of business, keep the labour market flexible, create a tax environment conducive to business growth, build efficient public services and make the European Union work for business. (http://www.cbi.org.uk)
Conservatives to scrap council tax revaluation
The Conservatives have pledged to scrap council tax revaluation. Party leader Michael Howard said the Tories would not apply new tax ratings to homes for the course of the next parliament. (http://www.epolitix.com)
Conservatives pledge to raise stamp duty threshold to £250,000
In a move designed to help first-time buyers, the Conservatives pledged to raise the threshold at which stamp duty must be paid to £250,000, from the £120,000 where it currently stands on domestic properties and £150,000 on the sale of commercial premises. Duty would, however, still kick in at 3% at £250,000. (http://www.conservatives.com/)
Liberals aim to swap council tax for local income tax
The Liberal Democrats have proposed to abolish the council tax system and replace it with a local income tax. The tax would be expected to average 3.75% and the Liberals estimate that 15 million will pay less under this system. Liberal leader Charles Kennedy said "If a working couple are paying the average Band D council tax of £1,214, their income would need to be over £42,000 before they would even begin to pay a penny more." (http://www.epolitix.com/EN/News/200504/)
Plaid Cymru complains of lack of affordable housing in Wales
Welsh nationalists, Plaid Cymru, identified four main concerns for housing in the principality: a scarcity of homes for local people, homelessness, a lack of social housing, and the desperate need to take measures on affordability in Wales. The party pledge: “In our housing manifesto we call for changes in planning regulations, help for local communities to set up land trusts, the scrapping of tax breaks for second homes, and that councils be let stop the right to buy if they consider it appropriate.” (http://www.epolitix.com/EN/News/200504/)
Television Highlights
HBF Chief Executive Rob Ashmead appeared on BBC London on 19 April commenting on how to improve housing supply in London.
University of York housing expert Professor Steve Wilcox said that new house building is necessary in order to keep residential property affordable for first time buyers in an interview on the BBC Two’s Newsnight. Professor Wilcox commented: “Over the last 15 years, the total number of new houses being built has lagged behind the number of new households forming at the rate of 20,000 a year. That deficits means that the pressure in the market have been that much greater and house prices have gone up that much higher than they otherwise would.”
Company News
Wimpey cautious on the outlook for the market…
At the AGM on 14 April John Robinson, Chairman of George Wimpey, commented: “The UK housing market will continue to be supported by the ongoing shortage of supply and underlying consumer confidence. However, it remains too early to predict the outlook for the full year whilst there are uncertainties surrounding the forthcoming general election and possible interest rate changes.” (http://miranda.hemscott.com/ir/wmpy/pdf/)
…..as are McCarthy and Stone
McCarthy and Stone reported interim results for the six months to 28 February. Pre-tax profit rose by 9.5%, compared to the same six months a year ago, to £48.3m on turnover of £131m, with pre-tax return on capital at 40%. The number of sales rose 1.5% to 792 units and the landbank was expanded by 23.9% to 2,207 plots with planning permission.
McCarthy and Stone Chairman/Chief Executive Keith Lovelock noted that “Although we expect selling price strength to continue to offset volume softness to a significant degree, we are slightly more cautious in relation to the expected results for the second half.” (http://miranda.hemscott.com/servlet/)
Bellway predicts house price stagnation
Bellway has predicted continuing stagnation in the housing market - chief executive John Watson said: “We are assuming a nil house price inflation environment for the next 18 months.” Watson also warned that the general election was having an “unsettling” effect on the market. “If it had been the foregone conclusion that it was in 2001, it would be different,” he said.
The comments came on the back of Bellway’s interim results; the firm reported an 18.5% rise in pre tax profit to £91.7 million in the six months to the end of January on turnover that rose 13.2% to £493.9 million. It has achieved 97% of its full year sales target and in the first six months its average house price had risen by 6% to £167,000. Bellway also said that its exposure to part exchange deals had doubled since July last year after a slow down in the housing market. (http://www.bellway.co.uk/investorinfo/)
Wilson Bowden joins ranks of FSTE4Good
Wilson Bowden plc has been included in this year’s FTSE4Good Index CSR index, designed to measure the performance of companies against globally recognised corporate responsibility standards of environmental performance, social issues, stakeholder relations and human rights.
Wilson Bowden’s group planning director, Ian Biddulph said: “We are delighted to be included in such a widely esteemed index; it not only reflects the company’s commitment to integrate environmental and socially responsible considerations into business decision making at all levels but will provide a useful benchmark for moving forward.” (http://www.wilsonbowden.co.uk)
Housing Market News
Signs of over pricing by sellers as Rightmove report a rise in asking prices…
The Rightmove House Price Index reported that asking prices rose by 1.3% from 13 March to 9 April, to leave prices 7.0% higher than at the same point in 2004. Rightmove commented: “Asking prices are still not coming under control, widening the gap between the expectations of buyers and sellers.” (http://www.rightmove.co.uk/pdf/p/hpi/)
While RICS report price falls
The Royal Institution of Chartered Surveyors’ (RICS) housing market survey for March recorded a deterioration in the balance of surveyors reporting a fall in prices. The three-month average net balance of those reporting a declining prices fell from –34% in February to –37% in March (Chart 12). RICS note that “Surveyors are commenting that unrealistic pricing by sellers is restricting sales activity.” (http://www.rics.org.uk)
Other News
Barker calls for commitment
Kate Barker, author of the Barker review and member of the Monetary Policy Committee, has warned that the next government should not use slowing housing demand as an “excuse” not to implement her review. Speaking at the House Builders Federation's Barker one year on conference, she said: “This review was about long term trends. I hope we won’t see slowed demand used as a political excuse not to continue with Barker. The need is still there.”
The conference also saw a call for radical changes to PPG3 to improve the planning process for housebuilders. John Stewart, HBF’s director of economic affairs, said the government’s review of PPG3 needs to look at making “planning responsive in terms of market signals.” HBF chairman Stewart Baseley said: “We need a more sensible PPG3 policy. The industry cannot currently work with it.” (http://www.hbf.co.uk)
Poll finds struggle continuing for first time buyers
An HBF-commissioned poll has revealed widespread concern that house prices are out of the range of first time buyers. The poll, carried out by YouGov for the HBF, found that 94% of the 2,644 respondents thought first-time buyers would suffer financial difficulties. While 64% of those questioned thought buying a house now was harder than when they first bought, and only 5% thought it was easier. One-fifth of first time buyers in the last five years received assistance from relatives.
The survey came as the HBF released its manifesto for housing policy in the next parliament. It calls for all parties to prioritise new measures to increase housing supply and sets out how Kate Barker’s recommendations in her review of housing supply could be implemented. HBF chief executive Rob Ashmead said: “Getting housing provision right is a matter of national importance, so we are setting out the steps we believe are essential for the next government to take.” (http://www.hbf.co.uk/)
Prescott’s northern plans under attack
Deputy Prime Minister John Prescott’s plans to demolish hundreds of thousands of homes in northern England is facing a united local opposition. Residents whose homes are in line for demolition are joining forces to fight Prescott’s housing regeneration scheme. Groups from Liverpool, Lancashire, Hull, Oldham and Manchester have come together under the banner Houses Under Threat to mount a stronger opposition to the controversial plans.
English Heritage chief executive, Simon Thurley, recently said: “We should move away from the idea that the problem is the housing rather than the people. To say that terrace housing causes problems is, to put a technical term on it, bollocks. Fulham, Chelsea or Bath have plenty of terrace housing and are not dysfunctional. It is a small number of families making life a misery for everyone else.” (Guardian)
Paul Samter
Senior Analyst - Economic and Policy Affairs
House Builders Federation