A weekly news summary by Pierre Williams, the HBF's head of media, covering all aspects of the housebuilding industry. Available to members only.
Mixed News on Prices: Latest Surveys
Property prices have fallen for the seventh consecutive month according to Hometrack. It reported a further 0.4% overall drop in prices and said sales volumes were more markedly down. It also suggested any recovery was unlikely before June, given that hoped-for interest rates cuts look increasingly remote. This is at odds with the latest Nationwide figures suggesting prices rose by 0.4% in January. The building society said confidence was returning as increasing numbers of buyers took the view that the softening of the market was not turning into a crash. A spokesman said: “If you go back five or six months, there was a lot of panic that there would be a crash. Now, with prices bobbing up and down, their fears about a massive crash have lessened.” (All media)
FTBs Priced Out of Almost Every Town
A Halifax study concludes that first time buyers are unable to buy in 92% of British towns. This has led to a collapse in the number of FTBs. Just 361,000 – accounting for just 29% of home purchases - managed to get on the housing ladder last year, compared to 532,000 in 2002. The age of the average FTB has also risen to 34. The bank blamed the government for failing to raise stamp duty thresholds in line with house price rises and said FTBs had to save an average £1,300 to pay the tax – equivalent to 5% of their deposit or 2.5 weeks of their gross annual salary. Last year the average FTB needed savings of almost £30,000 to cover the deposit, stamp duty and other costs necessary to buy; whilst in London this figure was closer to £50,000. The average FTB also pays an average £131,000 for their first home – a rise in 16% in the last 12 months. The Conservatives jumped on this to berate the government for making the home-owning dreams of aspiring FTBs “virtually impossible”. (All media)
HBF Note: The launch of this report was particularly well-timed to focus attention on the government’s five-year housing plan and associated schemes to help FTBs, which were also announced this week – see below:
Government Re-affirms Commitment to Housebuilding and Help for FTBs
The government has launched its “five-year housing plan” which, in essence, re-affirms its commitment to a substantial increase in housebuilding with a target of 1.1m new homes in London and the South East by 2016. The prime minister also made it clear that expanding home-ownership was the goal, with a target of 80% of owner-occupiers in 10 years time. He said: “Hundreds of thousands of people should be able to own their own homes.” In addition to the re-affirmation of the housebuilding plan, John Prescott announced the expansion of right-to-buy for 300,000 more housing association tenants and launched a “competition” to entice housebuilders to build 15,000 homes for a maximum of £60,000 each on 120 redundant government-owned sites. (All media)
What Housebuilders Think of the £60,000 Home
The £60,000 home “competition” announced by John Prescott has received a lukewarm reception from housebuilders. Pierre Williams for HBF welcomed the overall tone of the five-year plan as a “welcome confirmation of government commitment to addressing housing undersupply as a whole” but said that whilst it might be possible to build a basic house for £60,000, it was “sustainable communities” and not just houses the government wanted to create. Housebuilder bosses were generally sceptical of the £60,000 home. Wilson Bowden CEO Ian Robertson warned government that housebuilders were private companies – not government contractors. “We are housebuilders that try to interpret what the market wants, takes a risk on land and builds,” he said. And the fact that developers will struggle under the tight margins and increasing red-tape they face in their core business activities seems to be on Tony Blair’s radar. “If we want the housebuilders to do their best, then we’ve got to understand what their problems are as well,” he said. Crest Nicholson CEO John Callcutt stressed the infrastructure requirement: “There is no doubt that housing can be built for £60,000 but what about the roads, the infrastructure and the living environment? Anything which helps to make housing more affordable is fine by me but it needs to be sustainable.” (BBC News, Channel 4 News, all print media)
HBF Note: Despite the difficulty in reconciling Mr. Prescott’s desire for the cheapest possible housing in the most sustainable development, Tony Blair seems to have picked up on the novel idea that housebuilders might know something about building houses. He told the FT: “If we want the housebuilders to do their best, then we’ve got to understand what their problems are as well.” Press comment on the £60,000 has been almost universally sceptical
Barker: Weak Dollar, not Housing, UK’s Main Economic Threat
Kate Barker, Monetary Policy Committee member and author of the Review on Housing Supply, said the weakening dollar might be a bigger threat to the economy than a fall in house prices. Both Barker and fellow MPC member Stephen Nickell suggest that a cut in interest rates is not on the immediate agenda as the latest data shows the overall rate of inflation is creeping upwards. (All media)
Developers “Losing Race to Build Homes”
The Nationwide has produced a report saying the pace of household growth is increasing at a rate unmatched by housebuilding and that Britain is only five years away from having more households than dwellings. The building society did not factor the government’s housebuilding plans into its calculations, saying it was not clear how many would be built and whether the plans would actually happen.
HBF Note: Not exactly an exclusive story, but a timely reminder from Nationwide that government plans need to be put into action
Demand for 100% Mortgages Plummets…
New figures show a collapse in the number of 100% mortgages taken out over the past three years, despite a host of lenders’ incentives to boost demand. CML said the proportion of customers taking out these loans fell from a peak of 22% in 1990 to 7% in 2002 and just 5% over the past two years. (All media)
HBF Note: Of course this suggests that borrowers are taking a more cautious view of the perils of falling into negative equity. But the collapse of FTBs as a result of reduced affordability is probably the biggest factor.
…and Actions to Repossess Reach 6-Year High
Court actions for home repossessions are at their highest for almost six years as higher interest rates bite harder. There were 20,667 repossession actions in the last quarter of 2004 – up 15% on the same period of 2003. Of course actions are only the first step and actual repossessions - which stood at 3,160 for the first half of 2004 - have dropped slightly since. (All media)
Cherry Sees Off Billionaire Rival
The battle for control of Countryside Properties is over after founder and chairman Alan Cherry increased his offer and his rival, Rock Pacific, threw in the towel. Mr Cherry raised his 275p-a-share bid to 280p, valuing the company at £222m. Rock, which had been stalking the company after secretly building up a 13% stake and taking control of a further 15%, said it would accept the new offer. Even though Rock decided not to up its offer, it is thought to have made £8m through its strategy. Shares fell 6p to 277p. (Telegraph, Mail, FT, Times)
Crest Claims Lead in Ethical Housebuilding
Affordable housing production by Crest Nicholson has rocketed by 131% over the past year. The company completed 712 units and CEO John Callcutt said he believed the urban renewal market could be worth £30bn. Reporting annual pre-tax profits to October last year up 10%, Callcutt said Crest was benefiting from government support for mixed-use regeneration schemes such as Bristol Harbourside and Birmingham’s Park Central. He said: “Ethical housebuilding is the future and we are the leader in the field.” (Guardian, FT, Times)
Building Site Theft Costs £800m
Plant theft from building sites is costing the construction industry £800m a year according to a study by insurer Allianz Cornhill. About £70m worth of plant – especially JCB diggers and compressors – are stolen annually. But the real cost to the industry is far higher when the cost of hiring replacements, loss of business and higher insurance premiums are taken into account. Although the cost of plant has risen 5 – 10% over the past five years, premiums have jumped 40% and are set to rise further. Plant theft also tends to rise when construction activity slows. (FT)