A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Mervyn King testifies before Lords Committee
Bank of England Governor Mervyn King testified before the House of Lords Economic Affairs Committee, pointing out that the Monetary Policy Committee’s (MPC) role was to target the inflation rate rather than economic growth: “The idea that the MPC can fine tune the economy and can, in fact, ensure that the economy grows at some fixed rate every quarter is imaginary. It’s important that people understand what we can do but also what we can’t do.” Mr King also said: “I think a number of people in the last six months have been talking as if the MPC targets demand, or even more oddly, retail sales or consumer spending. We are not. We are trying to target inflation.”
Despite observing that the economic environment ahead was a “slightly bumpier road”, Mr King made clear that “the wheels were not coming off” and that the nation might have to get used to slower consumer spending growth. Mr King said there was little sign of the recent rise in inflation feeding through into higher wage growth: “We would be concerned if earnings growth were to pick up sharply in response to the recent rise in inflation. We will watch very carefully for that. So far there is no sign of it and it is important that it remains stable.” (Financial Times, Guardian, Times, Independent)
Political Events
Housing Minister rallies housebuilders to beat nimbys
Housing Minister Yvette Cooper has called for housebuilders to help the government “win the argument” with nimbys for an increase in housebuilding. “We need to find ways to speed up the planning process. But it isn’t just about this. We have to start winning the arguments in every area about the next generation," she said. “It is not simply about the planning system it is about us all, including developers, going out and winning the argument. It's no good housebuilders saying local communities don’t want development so we will walk away or try and get the government to do something. We have to win the arguments."
Speaking at the TCPA's More and Better Homes summit, the Minister said she wanted to explode the “myths and misconception” that a growth in housebuilding was a threat to the countryside. But the only way to do this was by winning the debate as opposed to overruling local authorities. “We have to recognise the important role of democracy in the planning system. People have different views on how to use land.”
She also called for the housebuilding industry to respond to the market, “in terms of quantity by getting out of the low output equilibrium.”
(www.tcpa.org.uk)
Company News
Profits fall at Westbury
Westbury plc announced that pre-tax profits for the half year to 31 August were 26% lower than over the same period in 2004, at £45.5m, on turnover of £415.3m. The company sold 1,934 homes over the six months, compared to 2,087 in the same six months a year earlier, and reduced their consented landbank by 3.8% to 15,100 plots.
Chairman Geoffrey Maddrell, commented that “this has been a challenging year for the housebuilding industry with the market trading below expectations particularly during the summer months.” However, he was more upbeat looking further ahead: “Although this is proving a difficult year for our industry, the fundamentals are still sound with potential demand exceeding supply. We firmly believe that our strategy through volume growth is achievable over the coming years.”
(www.westbury.plc.uk)
Housing Market
House prices fall for the 16th month according to Hometrack
Website Hometrack reported that house prices fell for the sixteenth consecutive month in October. Prices were reported to have dropped by 0.1% from the previous month, to stand 3.5% lower than in October 2004. The level of buyer activity rose 5.9% from September although supply was reported as continuing to exceed demand.
Housing Economist John Wrigglesworth commented: “The key feature of the market this month is a significant increase in sales activity, helped by more buyers returning to the market… Annual house price deflation this year looks set to be around four per cent. However, 2006 should see a recovery as rising household incomes should help to improve house purchase affordability. Barring interest rate rises or significant jumps in employment… house prices should resume their upward path before the middle of next year.”
(www.hometrack.co.uk)
Rise in mortgage possession proceedings
Figures from the Department for Constitutional Affairs (DCA) showed a rise in the number of mortgage possession proceedings over the third quarter. The number of actions entered into rose by 55% compared to the same period a year earlier, while the number of possession orders made was up 66% on the same basis. However, it is important to note that these figures are not necessarily an accurate guide to the number of repossessions being made. The DCA commented: “Since many of the orders made will not have been enforced these figures do not reflect how many properties have been taken into possession. Figures on properties being taken into possession are published twice a year by the Council of Mortgage Lenders.”
(www.dca.gov.uk)
Mortgage lending continues to rise
Figures from the British Bankers’ Association (BBA), (who cover approximately two-thirds of mortgage lending) showed a continued rebound in mortgage lending in September. In comparison to September last year, monthly approvals for house purchase were 17% higher by number and 37% higher in value. Equity withdrawal loans were 13% lower by number and 5% lower by value.
BBA Director of Statistics, David Dooks, commented: “September’s upturn in both gross and net mortgage lending possibly reflects a delay of the demand normally seen in late Summer, but there is also a stimulus from remortgaging. Two-year fixed rate loans taken during the buoyant period of 2003 are maturing around now and borrowers are seeking out new options.”
(www.bba.org.uk)
Other News
Living alone the new right of passage
Solo living has become the new rite of passage, with 97% of 25-34 year olds believing that it is important to live alone before settling down. This was the result of the “Unilever Family Report 2005 – Home Alone”, published by the Institute for Public Policy Research (IPR). The research was based on a YouGov poll.
It was also discovered that 51% of 25-34 year olds think living alone is a temporary stage for them, while a quarter said they would continue living alone indefinitely. 27% of those living alone said that they see friends more regularly as a result. 55% of people said that living alone had a negative affect on their disposable income with rents and bills taking up a higher proportion of income. This was found to be a more severe problem for working class people living alone. These factors, along with the fact that single households are more likely to go out in the evening and to spend more on alcohol, led to the report coining the phrase the “solo pound” to describe these spending patterns.
(www.ippr.org.uk)
Shelter calls for more family sized homes to alleviate overcrowding
As many as 268,000 children could be sharing a bedroom with their parents and 72,000 teenagers of the opposite sex could be forced to share a bedroom due to overcrowding, according to a report “Full House?”, released by charity Shelter. Nine in ten of those surveyed responded said that living in an overcrowded home makes it hard for children to study, harms the health of their children and causes depression, anxiety or stress in the home.
Adam Sampson, Director of Shelter, said: "Giving children the space to grow and learn ought to be a realistic expectation in 21st century Britain. Yet today the health, education and future chances of thousands of youngsters are being blighted by cramped conditions that have more in common with the Dickensian era than those of a modern, thriving nation. More than a year since legislation was passed making it possible to modernise our antiquated overcrowding laws, the Government must urgently publish its proposals for updating them. But most importantly of all, Gordon Brown must fund the social rented family-sized homes this country needs to end the misery of overcrowding."
(england.shelter.org.uk)
RICS predict that new Sipp rules will only have small impact on market
The new pension rules, which will allow those within a self-invested personal pension (SIPP) to hold property as part of their pension fund from April 2006, are not expected to be a significant boost to the housing market, according to a report by the Royal Institution of Chartered Surveyors (RICS). RICS expects the new regulation to increase property sales in the three years between 1 April 2006 and 1 April 2009 by 160,000. This is only 3.5% of the total 4.5 million sales that RICS forecast over the period.
RICS played down speculation that the change in regulation will have a sharp impact on the property market and expects the impact to be gradual. The research also showed that the change is expected to have a larger impact outside of London. A survey of RICS members revealed that surveyors in Scotland, the north, east and west of England were more optimistic about the new rules having a positive effect on the market than in London or the South East.
(www.rics.org.uk, Independent, Times)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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