A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
First quarter economic growth revised downwards
The second estimate of first quarter Gross Domestic Product (GDP) growth was revised down from 0.6% over the quarter to 0.5%, meaning an annual increase of 2.6% from the first quarter of 2004. The reduction was largely due to the fact that manufacturing output fell by 0.7% over the quarter and the downward revision had been widely anticipated by economists. (http://www.statistics.gov.uk)
OECD cuts growth forecast for the UK and expects interest rates to remain unchanged
In its biannual World Economic Outlook, the Organisation for Economic Co-Operation and Development (OECD), cuts its growth forecast for the UK economy from 2.6% in the last edition to 2.4% for 2005, comfortably lower than the Chancellor’s forecast of 3-3.5%. The OECD commented “In the absence of an increase in rates… additional revenues will be barely sufficient to cover the planned increase in nominal public expenditure.” The OECD also commented that interest rates did not need to increase any further (they had previously called for rates to be 75 basis points higher) due to the easing of consumer spending and weak export demand from Europe. (http://www.oecd.org)
Government Policy
Deputy Prime Minister promises “more homeowners than ever”
Deputy PM John Prescott and Chancellor Gordon Brown announced that “more people than ever are being given the opportunity to own their own homes.” The announcement came as the Government reported that their regeneration agency, English Partnerships, had purchased nearly 100 surplus NHS sites with a view to supplying affordable homes. Mr Prescott also announced three further public sector sites for the Design for Manufacture competition, which challenges builders to design homes for around £60,000. In all, the scheme will provide nearly 1,000 homes. (http://www.odpm.gov.uk)
Overall, the package could release 800 former government sites, including disused rail stations and coal yards, covering 3,600 hectares, sufficient to build around 145,000 homes. (Times)
First-time buyers to be offered shared equity schemes
Also following on from proposals outlined by Gordon Brown in the Budget said that the government would introduce a shared equity scheme for first-time buyers, which would not be restricted to key workers. Buyers would raise 50 to 75% of the value of their property under the scheme and would pay a capped rent of no more than 3% on the remaining share. The Treasury said that on a typical scheme buyers would pay 70%, the government 15% and the lender 15%. The Chancellor expected 100,000 to benefit from the scheme over the next parliament. Sue Anderson, from the Council of Mortgage Lenders welcomed the scheme but commented: “We’ve got to see more housing supply accompanying this otherwise there’s a risk that all you do is push house prices up further.”
The House Builders Federation also raised concerns, saying that an increase in the supply of homes was also essential. "The government must commit to the implementation of the Barker agenda, in particular reform of planning guidelines to speed up the release of land for new homes, if supply is to be increased and housing is to be made more affordable across the board," it said. (Times, Guardian, FT)
Chancellor promises to cut red tape
Writing in the Financial Times, Chancellor Gordon Brown outlined plans to reduce the regulatory burden on business, following up an announcement of his plans in the last Budget. He commented: “Under a risk-based approach [the new scheme], there is no unjustifiable inspection, form-filling or requirement for information… Instead of routine regulation trying to cover all, the risk-based approach targets the necessary few.” The new approach will lead to the reduction of 29 regulators to 7 following legislation in the new year.” (Financial Times, http://www.hm-treasury.gov.uk)
Housing Market News
Hometrack report continued price stagnation, but rising activity
Website monitor Hometrack’s May survey showed that the housing market continues to be flat with prices falling 0.1% over the month, to stand 2.3% lower than May last year. However, Hometrack also reported that sales rose 7.6% over the month, on the back of a 9.4% rise in April, “suggesting the market is turning the corner.” (http://www.hometrack.co.uk)
Kate Barker does not expect government first-time buyer schemes to push up prices
Speaking at the Royal Institution of Chartered Surveyors conference, Kate Barker defended Gordon Brown's plans for first-time buyers against accusations that they would push up prices. Some analysts have said the proposals to split the cost of homes with the Government and mortgage lender could re-ignite the housing market.
She told the conference: "That would be true if you introduce more subsidies but did nothing about supply. However, what we have now is a Government committed to both subsidies and increasing supply." (http://www.rics.org.uk)
Company News
Housebuilder to go public with satisfaction scores
Miller Homes is to go public with its customer satisfaction scores for the first time. Initial figures will be released to the public later this month with updates to be published every six months over the coming years. The move follows recommendations made by Kate Barker in the Barker Review of housing where she set housebuilders the target of increasing customer best friend referral rates to 75% by 2007.
Tim Hough, Miller Homes chief executive, said: “To date, we believe that we are the only housebuilders to share our customer satisfaction results in this level of detail.” He added: “Since 1999, we have consistently improved our scores in each of these areas - best friend rates alone are up 27% since records began.” According to Miller Homes’ first customer satisfaction report, based on independent analysis by Inhouse Research Ltd, 83% of its customers would now recommend the company to their best friend.” (http://www.miller.co.uk)
Other News
British Property Federation pushes for quick adoption of Reits
The British Property Federation made a submission to the government in response to the treasury’s proposal to introduce Real Estate Investment Trusts (Reits) in 2006. Reits reduce tax payable by property companies and are common in many other countries. The BPF argued that the Treasruy’s fears of lost tax revenue are overdone, although there would be some initial tax loss and that if a decision is not made soon, property investment companiens will go off-shore. (http://www.bpf.org.uk)
John Gummer warns of gridlock in the planning system
Writing in the Estates gazette, Conservative MP John Gummer warned of a potential gridlock in the planning system from regional pressures. He commented: “The county council elections have further consolidated the power of anti-regional councils and councillors. Gridlock seems inevitable in several regions where the assemblies are dominated by councillors whose first allegiance is to the districts and counties to which they have been elected. Their position is now stronger than Mr Prescott wanted and they have every intention of asserting it.” (Estates Gazette)
Prince of Wales condemns Prescott’s plans
The Prince of Wales attacked Deputy PM John Prescott’s plans to knock down homes in the North and Midlands to build modern properties. The Prince said, “Old, historic, characterful buildings are knocked down, even though in the longer term it would cost far less in financial, social and environmental terms to refurbish and convert them to other uses, such as residential and mixed use”, at a speech to the Institute of Chartered Accountants. (Times)
EP announce that Cornhill Estates and Fairclough Homes will take forward Northampton development
English Partnerships announced that Cornhill Estates and Fairclough Homes will take forward a two year development programme at Site B, Upton, Northampton. Planning permission has been granted for the development of 204 homes on the 4.5 ha site which overlooks park and woodland and is located on the edge of Northampton. Plans include a mix of houses and flats with designs ranging from traditional to very contemporary. Development will begin on site this summer. 22% of the homes built will be affordable. (http://www.englishpartnerships.co.uk)#
BPF and Lenders clash over buy-to-let lending
Lenders hit back over claims from the British Property Federation that lending to buy-to-let investors had been relaxed, allowing lending on less stringent criteria than in the past. The Council of Mortgage Lenders commented: “They (lenders) are restricting the market very carefully and the levels of arrears and repossessions suggest investors are making sound decisions.” In response to anecdotal evidence that “get rich quick” schemes account for a large slice of the new-build apartment market, the CML said: “There is no evidence to suggest such activities are a main part of the buy-to-let market.” (Financial Times)
Housebuilders should watch out for hoodies
A survey by propertyfinder.com and upmystreet.com has found that hooded topped youths are one of the largest turnoffs for buyers. The survey shows that 94% of home hunters would be put off buying or renting in a street where teenagers congregate. 51% would not even consider such a street. Graffiti was another big turn-off with 97% saying it would put them off buying.
Period architecture was found to be popular in all regions. Most people preferred Victorian and Georgian architecture with the Scottish the least interested in period styles. (http://www.propertyfinder.com, http://www.upmystreet.com))
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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