A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, the HBF's head of media. Available to members only.
Housebuilders hit by housing slowdown
Housebuilder share prices have been hard hit following a profits warning from estate agency chain Countrywide, and a further warning by housebulider Countryside about a severe market slowdown and a forecast that full-year results would be below expectations. These combined warnings had a knock-on effect across the sector. Barratt lost 4.8 percent to 562p; Persimmon was 6 percent down at 643p while Taylor Woodrow was down 4.9 percent. Mortgage lenders also took a bashing. (All media)
Booming Barratt goes for growth
Barratt CEO David Pretty has announced big growth targets with the group looking to boost volumes by more than 40 percent over the next six years. Unveiling a 27 percent rise in profits for the year to the end of June, Barratt looks untroubled by the recent cooling of the market, a stance not shared by George Wimpey and Taylor Woodrow who may cut volumes in response to the slowing market and difficulty in obtaining planning consents. Mr Pretty believes undersupply will see his plans for growth succeed, especially as with 80 percent of output now on brownfield, his company has the experience it needs in regeneration. Mr Pretty said: “Twenty thousand units is not an unrealistic expectation. The demand for new homes still exceeds supply and although we are the UK’s largest volume housebuilder we still only have a 9 percent market share.” (All media)
HBF note: The FT comments that Barratt’s strong performance, its improving landbank and efficient management, should not be underestimated. That aside, Barratt’s drive for volume growth should be welcomed by government.
Prescott rages: “Why does bloody housing cost so much?”...
“Why does it cost so much to build bloody houses in this country?” That’s the question John Prescott put to a National Housing Federation conference this week. Highlighting that the average subsidy for each housing association home had more than doubled to £66,000, Prescott demanded the industry to “get tougher with prices”, adding: “What I’m faced with is pouring in more and more subsidies and getting less and less.” (FT, Guardian)
HBF note: What is not so clear is whether Prescott’s ire is directed primarily at the social housing sector, the private sector, or both.
... well, you should know, Mr Prescott
The answer to Prescott’s question was delivered in today’s Telegraph. The reasons why build costs are up are all government led and largely down to the endless changes to building regulations. Listed alphabetically, new regulations have reached the letter P. “It’s a pretty thick book by the time you’ve factored in the sub-clauses, said the HBF’s Dave Baker. “There’s no doubt the regulatory burden on housebuilders has increased significantly since 1997.” But regulations are far from the only reason why build costs are up. The government’s drive for brownfield and its associated clean-up costs, plus the woeful state of the planning system were both highlighted by Redrow CEO Paul Pedley and Wilson Bowden CEO Ian Robertson, while Pierre Williams for the HBF threw in the burgeoning costs of planning gain and ‘affordable’ housing. (Telegraph)
HBF note: The Telegraph further comments: “They’re not making land any more but they’re sure making building regulations. There’s no such thing as a free lunch Mr Prescott, however many you may wish for yourself.”
Housebuilders’ fury over PPG3 changes
Housebuilders are furious with draft - but still confidential - changes to PPG3 that have been leaked to the trade press. The revised guidance proposes allowing LPAs to dictate the type and size of housing on new development. The draft suggests allowing LPAs to refuse permission for schemes of more than 15 units that fail to meet their requirements in size and type, as well as affordability, although they “should not make development unviable”. Williams, for the HBF, said: “We’re very concerned. The government talks about devices to solve the housing crisis but these policies aren’t tackling undersupply. Perhaps they should realise that people know their own minds.”
HBF note: Despite being leaked, this guidance is still officially confidential and the HBF has a duty to respect this. The real 'debate' is yet to start.
Barker warns price falls could affect 'affordable' build programmes
Long term plans to boost the supply of 'affordable' housing could be derailed by a short-term drop in house prices, Kate Barker has warned. Closely echoing the warning made by George Wimpey CEO Peter Johnson two weeks ago, the Bank of England economist said: “Influences like short-term falls in house prices could divert us from where we need to go.” She said falling prices would hit supply if developers put new schemes on hold while waiting for prices to recover. But she said she still expected the market to make a soft landing. (FT)
But IMF and bank clash on market prognosis
The sturdy economy should survive any housing market crash, which, the Bank of England says, is a remote possibility anyway. However, the IMF this week issued another gloomy warning that it believes a crash is a real possibility. Analysing the traditional causes for rising prices - interest rates, incomes, affordability and lending growth - it could not find a reason to explain why prices are 15 to 20 percent higher than these fundamentals should allow for. The conclusion therefore is that prices are over-valued by this amount. However, the NAEA said the IMF had got its predictions “badly wrong” by failing to take undersupply into account. (FT, Independent, Express, Mail)
Speed of slowdown worries MPC
The speed of the housing market showdown has worried the Bank’s Monetary Policy Committee. Minutes of the last meeting held by the Committee showed members were increasingly concerned there could be “a greater risk of a more abrupt correction to house price inflation”. On a more positive note, this has prompted even more speculation that a further increase in rates is unlikely. (Times, Telegraph)
Berkeley investors back directors’ bonus plan
After months of speculation and controversy, Berkeley Group investors overwhelming voted through a restructuring plan to slim down operations, return £1.45 billion to shareholders and deliver the company’s management team a potential £150 million in bonuses. At the count, 93 percent voted in favour of the return of capital, easily beating the 75 percent required. In the second motion, almost 78 percent voted for the management incentive package, where only a 50 percent agreement was needed. The whole process took just eight minutes. A happy Berkeley MD Tony Pidgley, said: “The vote speaks for itself. I would like to see managers encouraged and rewarded to make longer-term commitments to their companies.” (Times, FT)
No need to work in live/work units
Those living in live/work units are not required to work in them, a county court judge ruled this week. Judge Roger Cooke, sitting in the Central London County Court, declared that the term live/work was “vague and arguably ambiguous” and should be interpreted broadly to mean “live and/or work” The ruling may mean some LPAs become reluctant to grant planning permissions for live/work units in future. (EG)
Government orders population: get procreating for Queen and Country!
Trade Secretary Patricia Hewitt is demanding couples start producing babies for the economic and social benefit of the country. The Minister’s outburst was made at a CBI conference. She told delegates: “We won’t have a future workforce if people do not have children.” Her comments were seen as the government taking the “nanny state to new extremes”. (Mail)
HBF note: So what’s this got to do with housing? Well, quite a lot. The fact that government wants people to have more children but is doing its utmost to stop the building of family homes doesn’t suggest much by way of “joined up thinking” at the highest levels of government. It was also interesting to note that the Mail also ran a story on the same day showing Sevenoaks in Kent was voted the happiest place in Britain - a town which I know offers the type of family homes that people want (and need for their families) in abundance.