This week's news summary is written by John Slaughter, HBF director of external affaires. Available to members only.
Interest rates may rise
The minutes from the Bank of England’s Monetary Policy Committee on 9 and 10 February revealed some dissent about the decision to leave rates unchanged at 4.75%. The bank’s executive director for markets Paul Tucker voted for a 25 basis point increase to end the longest period of unanimity amongst the MPC since it was formed in 1997. The minutes noted that: “For most members of the committee, the balance of risks to the inflation forecast was sufficiently to the downside to justify maintaining the repo rate at its current level, though some members noted that an increase might be warranted in due course if the economy evolved in line with the central projection.” (http://www.bankofengland.co.uk/mpc/mpc0502.pdf)
The bank’s chief economist Charles Bean and fellow MPC member Kate Barker also indicated that the next rate move may be upwards. In a speech at the Oxford Institute of Economic Policy, Mr Bean said: “There would be a potential loss to the credibility of the inflation target and a consequent de-anchoring of inflation expectations. And once credibility is lost, it can be costly to regain.” (http://www.bankofengland.co.uk/speeches/speech238.pdf)
In an interview with the Irish News, Ms Barker said: “The main reason we didn’t put up rates last time is uncertainty about short-term trends in the economy. We would like to see a bit more evidence out of the first quarter and particularly a better feel of what’s happening with the consumer going into 2005.” (FT 22/02)
Estate agents have put up asking prices in an attempt to take advantage of the traditional new year surge in activity. According to the property website Rightmove, prices rose by 2.3% this month, the biggest increase since June. Analysts predicted that prices will rise over the next few months after a seasonal drop in activity.
However, surveys also showed that buyer demand has dropped. Miles Shipside, commercial director of Rightmove, said: “Some sellers and estate agents are unable to shake off ingrained spring boom mentality of recent years. But this year is not typical and the laws of supply and demand don’t suggest that higher prices are sustainable.”
……while Inland Revenue figures suggest a slowdown
Government figures showed that the number of house sales fell last month. The Inland Revenue reported that 112,000 property transactions were registered for stamp duty last month, the lowest level for 14 months and a drop of 18% on December.
The Royal Institution of Chartered Surveyors said interest rate rises before August last year had caused a slump in activity in the second half of last year.
….. and mortgage lenders report a fall in approvals
According to the Council of Mortgage Lenders (CML) , mortgage approvals fell to a six-year low last month, renewing fears of a property slowdown. Figures from the CML show that loans taken out for home purchases fell 26% to 63,000 compared with December.
The number of buy to let landlords unable to meet their mortgage payments also rose in the second half of 2004. CML figures showed that lending on investment properties fell for the first time since records began.
Charity calls for an end to homelessness
The charity Homeless Link has produced a ten-point manifesto to highlight the plight of the homeless to MPs. The most ambitious point calls for a commitment from all parties to end homelessness in Britain by 2020. The manifesto also includes calls for more affordable homes and increasing spending on the Supporting People programme for vulnerable tenants.
Wimpey gets a profit boost
Wimpey has reported better than expected annual profits of £450.7 million, a rise of 19%. Wimpey shares pushed up 6% to 445p prompting share increases for other big players in the sector. Wimpey chief executive Peter Johnson said the situation was encouraging. “We appear to be looking at a stabilisation of house prices or a low increase,” he said.
Rich pump cash into property
The Guardian reported the number of new property millionaires in Britain has risen six-fold over the past seven years, creating housing "hot spots" in the north while underlining the strength of London and the south-east.
New research shows that sales of houses fetching more than £1m have jumped from 622 in 1998 to 3,824 last year, with every sign of another big leap in 2005 as the wealthy invest in property as an alternative to the stock market.
While fashionable areas of London, Weybridge in Surrey, Cobham in Kent, and Ascot in Berkshire are predictably high in the rankings, wealthy parts of Cheshire have leapt up the table, just below Oxford which is now equal 42nd with Henley. As a result, places like Bowdon, Hale and Wilmslow - footballers' country as well as an alternative stockbroker belt - are challenging the south.
"It's clear these sales are funded with a lot of equity and people are putting extra money into property as a traditionally safe investment," said Richard Donnell, head of Savills Residential Research. "But we're now seeing a shortage of 'top end' properties in London and the big rises are now likely to be in the home counties."
In the south-east, however, wealthy prospective buyers might be disappointed. Large detached houses, in spacious grounds - the most sought-after properties - are now at a premium because of planning guidelines.
"The figures speak for themselves," the HBF's Pierre Williams comments. "The reality is that [the guidelines] have been hugely successful in driving up densities and producing smaller homes and this inevitably reduces the number of substantial detached houses. And if they don't make them any more they go up in value."
Lib Dems appeal to mutual interest
Charles Kennedy MP, leader of the Liberal Democrats, launched his party's new housing policy, which aims to provide 100,000 affordable dwellings through a new Mutual Homes scheme.
The new plans also provide local authorities with more power to limit the growth of second homes, allow councils to vary right-to-buy discounts according to local needs, and encourage the re-use and conversion of existing buildings rather developing Greenfield sites.
Mr Kennedy said: "Our innovation is to create a completely new housing market to help people make the transition from renting to buying. Mutual homes will offer people the opportunity to build up an equity stake in a home gradually, investing only as much as they can afford."
But Hill claims stolen clothes
Responding to the Lib Dem plans, housing minister Keith Hill said: "Most of the Lib Dems' policies ape what we are already doing under the £38 billion Sustainable Communities Plan. However, as usual, the Lib Dems' proposals are completely uncosted.
"It is particularly worrying that the Lib Dems say nothing about repairing and refurbishing council homes. We have made a commitment to make all social housing decent by 2010 at a cost of some £42 billion."
HBF Note: The Lib Dem announcement confirms the importance of housing affordability as a political issue and the battle for new ideas in this area. A further Conservative policy statement on housing and planning issues is due shortly.
Also this week, as part of his Affordable Rural Housing Initiative, the Prince of Wales launched two new guides to encourage a wide range of businesses in rural areas to help meet the affordable homes crisis in the countryside.
Brown …. the Budget looms
Gordon Brown is expected to put his stamp on Labour's campaign for a third term in government when he delivers a pre-election Budget on March 16.
It will be Mr Brown's eighth Budget since Labour came to power in 1997 and there could be as little as 18 days between it and the announcement of an election date, if the widely-expected date of 5 May turns out to be true.
With recent figures for tax receipts showing that the public finances are in a better than expected state, the Chancellor has scope for some election sweeteners. Labour sources have predicted that he would be able to spend around £5 billion on a combination of extra spending and tax cuts.
Raising income tax thresholds to benefit low and middle earners -- a key target group for Labour -- in addition to changes to stamp duty to help first time buyers and concessions for pensioners are thought to be the most likely areas that will be addressed in the Budget. A substantial rise in the level at which inheritance tax becomes payable, now pounds 263,000, is also said to be under consideration.
Deep brown - bringing derelict land back to life
English Partnerships and the ODPM have launched a pilot programme aimed at solving England’s legacy of long-term derelict land.
EP research has identified more than 2,000 long-term 'hardcore' derelict sites that have been vacant since at least 1993, with an average size in excess of eight hectares. These sites, totalling around 17,000 hectares, have failed to be regenerated because of a series of problems summarised by EP as including contamination, market failure, cost and planning.
A further 4,500 sites with a total area in excess of 8,500 hectares have been vacant or derelict for at least five years.
The pilot programme aims to develop at least one 'hardcore' site in each of 12 areas across the country with a variety of problems and local market contexts. In each area, work will be led by a “local brownfield partnership” that EP expect to include developers, local business and community groups as well as government agencies. Work will begin in the next two months with a view to feeding in findings to the National Brownfield Strategy document that is expected to be published in early 2006.
Planning Minister Keith Hill commented: “Recycling land will help protect the countryside and enhance its quality rather than creating urban sprawl.”
…but brown is not necessarily the new green
Countryside campaigners have, however, called the plan to tackle brownfield sites that have been derelict for more than ten years “too little, too late.” Julie Stainton, planning campaigner for the Campaign to Protect Rural England, said: “The good news is that they are looking at it, but why have these sites been lying empty since 1993? It’s welcome, but it’s a pity it’s taken so long.”