A weekly news summary by Pierre Williams, the HBF's head of media, covering all aspects of the housebuilding industry. Available to members only.
Prices fall at fastest for 12 years but buyers return
House prices fell at their fastest for 12 years in November but there are clear signs that buyer interest is on its way up. Two thirds of Rics surveyors reported falling prices in November with just two percent reporting increases. The CML also reported a further seven percent fall in the number of new homes loans over the month. However, demand appears to have stopped deteriorating and buyer inquiries stabilised in November, bringing a halt to six months of falling interest.
In London, inquiries rose for the first time since March. But a substantial increase in new selling instructions in the North and in Wales suggests the biggest price falls will be in these regions. Like Persimmon (see below), Rics forecasts a three percent rise in prices next year, with most of the gains towards the end of the year. Rics said: "Sales usually pick up in the New Year and we are confident that this year will be no exception." (FT, Times)
Rock-solid Persimmon's Christmas cheer
Persimmon has defied fears of a crash with strong winter demand putting it on track for record profits. CEO John White said media pessimism about the housing market was not backed up by reality, with prices for new homes remaining stable and his group's profits for 2004 in line with forecasts of £467m - a third higher than 2003. "We haven't seen (a crash) despite eight months of customer sentiment being influenced by negative comment," said White. "Prices are fairly stable and volumes are only off a little. The second-hand market has had a correction but, with historically low interest rates and low unemployment underpinning demand, we are well positioned to see an upturn in 2005."
The group forecasts a three percent rise in prices next year. Volumes were up to about 12,400 compared to 12,163 last year, at an average price of £172,000 compared to £154,810. Forward orders also remain constant. On growth plans, White was keeping his cards close to his chest: "We have plenty of opportunities ahead which don't involve acquisitions but you can never say never." Shares rose 20.5p to 699p - up 54p on the year. (Telegraph, Express, Mail, FT, Guardian, Independent, Times)
George Wimpey on course for strong results
George Wimpey is also on course to deliver excellent results for the 2004 financial year and meet City expectations. But sales slowed in summer as rate rises and media speculation about the state of the market took their toll. Volumes are expected to be lower than last year, despite profits forecasts of £430m - £440m - up from £378m last year.
In a statement, the company said: "The lower selling rates in the second half inevitably had some impact on both second-half volumes and the order book for 2005." But looking ahead, the company is confident with the fundamentals of high employment, low interest rates and undersupply all likely to continue. (All media)
HBF note: The Telegraph investment column notes: "The foundations remain solid, even if the market is slowing. This housebuilder is worth holding".
Booming McCarthy & Stone more cautious
Although McCarthy & Stone's performance for the year has been "outstanding" Chairman and CEO, Keith Lovelock was keen not to paint an over-optimistic picture of future market conditions. Lovelock told the AGM that the company was operating "in what are clearly now more testing conditions", with reservations becoming harder to come by and the slowdown in the second-hand market stretching reservations and completions times. But he added: "On the positive side, our performance this year has been outstanding with record figures across the board."
Shares slipped 18p to 581p but with the company's share price having increased almost 200 percent since 2000, the City was unconcerned. (Independent)
MPC talks of rates cut
The Bank of England is talking about cutting interest rates. Whilst the Monetary Policy Committee this week decided to peg rates at 4.75 percent, some members talked of a cut, although they failed to make a "persuasive case" to the rest. The news was greeted with surprise by most independent economists but indicates the Bank may be concerned with a possible weakness in the international economy. The tabloid press greeted the possible future rate cut as a done deal that would provide a real boost to the housing market in the New Year. (All media)
Mortgages to soar as cut price deals end
The New Year is expected to see mortgage bills rise by as much as 27 percent for two million homeowners. About 600,000 borrowers are coming to the end of their cheap fixed-rate deals and will automatically be transferred to much higher variable rates unless they take out new fixed rate deals which will inevitably be substantially higher. Another 1.5 million have annual review mortgages that should result in all four of the quarter-point interest rate rises this year lumped onto mortgage costs. In cash terms, the average increase for these borrowers will be in the region of £124 - £139 a month.
The arch-pessimists of the housing market, Capital Economics, are largely relying on this mortgage servicing increase to fulfil their forecast of a 20 percent fall in prices. (Mail)
Pierre Williams
Head of communications
House Builders Federation
24 December 2004