A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
HBF AGM
HBF re-brands itself as the Home Builders’ Federation
At its Annual General Meeting on 27 April, the HBF announced that, as part of the strategic review, it was re-branding itself the Home Builders’ Federation, to better reflect the mix of homes that members now build and help move public perception of the industry forward.
New customer satisfaction survey announced
HBF also announced the launch of a customer satisfaction survey in response to last year’s Barker Review of Housing Supply recommendation that the new homes industry should seek to further improve customer satisfaction.
The HBF has responded to this challenge and will be inviting over 40,000 new home buyers moving into their homes during the next six months to complete a questionnaire.
The HBF, in close co-operation with the NHBC, and in association with other new home warranty providers, Homes for Scotland, and advised and audited by MORI, will publish industry-wide data showing how individual companies perform in the key areas. Home builders will be able to use the survey results to develop their existing customer service strategies and performance.
Rob Ashmead, Chief Executive of the HBF, said: “The launch of this survey sends a real signal to home buyers and the Government that the industry is determined to further promote and extend the growing standards of service and quality available to new home buyers. We are committed to strongly supporting the objectives of the Barker Report recommendations in this and other areas in order to meet the pressing national need for a better housing supply.”
The HBF is also actively working on other Customer Satisfaction issues, including a customer charter and a review of home builders’ purchaser contracts.” (http://www.hbf.co.uk)
Economic News
ITEM club forecasts solid economic growth over next two years
The influential ITEM club, sponsored by Ernst and Young, released their quarterly “Economic Outlook for Business”, painting a positive picture of the UK economy. The economy is forecast to grow at 2.7% this year and 2.4% next, while the current soft patch in consumer spending is expected to come to an end over the summer as “real income growth picks up and worries about rising interest rates and falling house prices disappear.”
The ITEM club expects interest rates to remain on hold, “at least until inflationary worries and the downside risks to the housing market and the high street remain.” However, there is also a warning that “pension deficits could also hold back industrial investment.” (http://www.ey.com/global/download)
Election Round Up
Conservative’s “Action for Business” plan
The Conservative party launched their “Action for Business” policy document, making a number of commitments. The Department for Trade and Industry will be transformed into “an efficient champion for business” and the number of staff will be reduced. DTI officials who work on business deregulation will undertake a minimum three-month secondment to a relevant business.
The Conservatives also stressed skills, setting out five main policy elements. Students and their employers will have greater freedom to choose where and how training is given, there will be a new network of “Super Colleges”, the Learning and Skills Council will be abolished in favour of a “streamlined funding body”, 300,000 vocational grants of £1,000 for 14-16 year olds will be introduced (so they can split their time between GCSEs and beginning vocational alternatives), and they would replace the Connexions Service with a new careers service for England.
(http://www.conservatives.com)
Labour launches “A manifesto for enterprise, skills and science”
Prime Minister Tony Blair, Chancellor Gordon Brown and Secretary of State for Trade and Industry Patricia Hewitt launched Labour’s vision for business, “A manifesto for enterprise, skills and science”. The policy document outlines Labour’s key pledges and commitments for business if it remains in power.
The government re-iterated its commitment to “raise the UK’s total private and public sector investment in R&D” to 2.5% of GDP (from the current 1.9%), as had been outlined in the last budget. On skills issues, Labour has pledged to roll out Employer Training Pilots into a national program in 2006 so that everyone in work without Level 2 skills will get the training they need in the workplace. They will also “create sector skills academy networks of training excellence with sector skills council and employers in every major sector of the economy.” Labour also pledge to increase the number of apprenticeships to 300,000. (http://www.labour.org.uk)
Labour’s rural manifesto to tackle affordable homes
Second homeowners are causing problems in rural communities admits Margaret Beckett, secretary of state for the environment and rural affairs. Rising house prices have made it difficult for some local people to afford to buy in the area they grew up in. Mrs Beckett was speaking at the launch of Labour’s rural manifesto. It said Labour would: “explore measures to ensure that local residents and their families' can continue to buy homes.”
The manifesto promises a new national commission to tackle the shortage of affordable housing in the countryside. Mrs Beckett said she wanted the commission to investigate the cause of the problem. “I want them [the commission] to look and see what are these rather disaggregated and different problems and see what are the things that we are not doing now. In some areas there is a second home problem, in other areas there is not.” (http://www.labour.org.uk)
Housing is an Election factor
Frustrations with the property market are high on voters' agendas, according to Mori, which found that 20 per cent of Britons would cast their votes at the general election depending on a party's policy on housing. (Financial Times)
Northern concerns
John Prescott faces growing opposition from within his own party to his urban regeneration policies, which could lead to the demolition of up to 400,000 homes across the North and Midlands.
At least 25 Labour MPs have complained to Mr Prescott's department that the policy of demolishing large areas of Victorian terraces is insensitive, unimaginative, unpopular and in danger of losing them votes not only in the general election but also in other elections over the 15-year lifetime of the "Pathfinder" schemes. (Daily Telegraph)
Company News
Taylor Woodrow expects fewer completions in first half
Iain Napier, Chief Executive of Taylor Woodrow, told shareholders at the company’s annual meeting: "With the present uncertainty over interest rates, the distraction of the general election and a more cautious approach from buyers, it remains too early to predict the UK market for the full year."
Mr Napier said Taylor Woodrow was performing in line with expectations. The UK housing market had improved from the end of last year and prices had remained broadly stable. However, the market was more difficult than in early 2004 and the group was likely to report lower year-on-year house completions in the first half. (Financial Times)
Martin Donohue retires as Westbury Chief Executive
Westbury group announced preliminary results for the full year to 28 February, reporting that pre-tax profit rose 13% to £120m on turnover of £893m. Westbury sold 4,361 homes over the period, compared to 4,400 over the previous 12 months. The number of plots owned with planning consent fell to 15,700 from 16,100 the previous year. Outgoing Chief Executive Martin Donohue said: “Our priority in the current year will be driving volume rather than average prices, through sustained marketing activity across an increasing number of active sites.” Mr Donohue steps down after 10 years as Chief Executive and will be succeeded by former head of the homes division, Nigel Fee. (http://www.westbury.plc.uk)
Heron and Crest continue struggle
Gerald Ronson’s Heron Corporation stepped up its campaign for Crest Nicholson by urging shareholders to “press the board” to permit Heron access to information on Crest. In a statement to the London Stock Exchange (LSE) Heron said: “If Crest Nicholson does not provide information on the business in advance of May 4, then Heron will not make an offer for Crest Nicholson.”
Crest responded by issuing it’s own statement to the LSE reiterating its belief that Heron has undervalued the company. It went on to say: “The board believes that there is sufficient information in the public domain to place an appropriate indicative value on the Company.” Crest also called for Heron to clarify the price of an offer, the parties who would make any offer, sources of funding and a timetable. “To this end, Crest is prepared to meet with Heron to assist Heron in improving its position as regards value and in clarifying other key components of its proposal,” it said. (Guardian, FT)
Profit warning for Britain’s largest estate agent
Countrywide has issued its third profit warning in seven months. The estate agent’s, Britain’s largest, shares dropped to 290p having hit 375p in March. The company said: “Transaction levels are between 25% and 30% below those experienced in the buoyant first quarter of 2004 and considerably less than one would expect.” Countrywide bought Bradford & Bingley’s estate agents for £44 million last October.
Reacting to the announcement Russell Jervis, Managing Director of Spicerhaart estate agents, said: “At the time that Countrywide bought the former Bradford & Bingley network, we thought it was a brave move on their part to pay the price that they did. In contrast to Countrywide, our sales have dropped by 10% less, to 17% below last year's equivalent and volume of sale transactions are now rising fast. It is common for the housing market to be a little subdued in the run up to a general election, however it is also common for the market to pick up post election.” (Telegraph, Times)
Contractor to set up housing division
Irish based private contractor Laing O’Rourke announced that they are setting up a housing division Explore Living, which will initially focus on South East England but plans to create a national presence. (FT)
Housing Market News
Nationwide describes trend in house prices as “broadly flat”
Nationwide reported that house prices rose by a seasonally adjusted 0.9% in April, on the back of a 0.6% fall in March, leaving prices 7.0% higher than a year ago. Group Economist Fionnuala Earley comment that recent changes “continue the overall trend of a broadly flat path of price rises since the end of last year” and that this trend “continues to confirm our view of a gentle slowing in the market.” (http://www.nationwide.co.uk)
Hometrack report sales on the rise as prices level
The property research group Hometrack has reported that sales are on the rise and prices are levelling out. Hometrack’s survey of the national housing market shows that despite a drop in house prices for the tenth consecutive month, the market was stabilising as the number of buyers increased. The rate of price falls has slackened for the fourth month in a row with the average price down a non-seasonably adjusted 0.1%. (http://www.hometrack.co.uk)
BBA reports some recovery in loan activity
The British Bankers’ Association reported a rise in the number of loans approved for house purchase in March to 65,600. However this is 33% lower than in March 2004. Director of Statistics David Dooks said: “Loans approved for house purchase saw some recovery, though it is too soon to say whether the slower housing market seen over the previous six months or so is picking up.” (http://www.bba.org.uk)
Stock market cooling on consumer spending
Stock market concern about consumer spending deepened after profit warnings from companies exposed to the slowing housing market. Kingfisher, owner of DIY chain B&Q, blamed a 6 per cent drop in underlying sales in the first quarter on a tough retailing environment. The FTSE 100 hit a 15-week low as fears of a ripple effect from the stagnant housing market hit retailers such as Dixons. (Financial Times)
Savills kindles US interest
US property group Trammell Crow has doubled its stake in Savills to 20%, prompting speculation that it may make a bid for the company. Trammell bought a 3% holding in the market on Monday, adding to the 10% it already held. Savills has revealed that Trammell had exercised an option to buy a further 7%. The option, part of an alliance between the two companies, was due to expire on May 9. Trammell Crow bought the second batch of shares for £36.8 million.
An analyst at Oriel Securities, Mark Young, said: “UK surveying firms have been the subject of globalisation for some years with Jones Lang Wootton, Healey & Baker, Richard Ellis, Hillier Parker, Nelson Bakewell, etc now all American owned. However, people businesses are only worth buying if the people themselves wish to be bought - we doubt the Savills culture would thrive operating as a wholly owned US subsidiary of Trammell Crow.” (Independent)
Other News
Home repossession court actions on the rise
Repossession orders have risen to a ten-year high, rising by one third in the first three months of the year. Mortgage lenders launched county court actions for almost 26,000 repossessions in those months, up 35% on the previous quarter. It is the largest number of court actions since the beginning of 1995.
The Council of Mortgage Lenders said the amount of court actions did not reflect the number of repossessions. These are running at historic lows of about 1,500 a quarter. It predicts that the number will rise from 6,230 last year to 10,700 in 2007. (Independent, http://www.dca.gov.uk/statistics)
House price rises gave Treasury £1.8 bn windfall
The decision to freeze inheritance and stamp duty taxes at the start of the financial year of 2004/5 saw the Treasury claim an extra £1.8 bn windfall tax compared to the previous fiscal year. The house price boom caused stamp duty revenues to rise £1.4 bn (18.4%) while inheritance tax bills rose £400m (16%). (Times)
National Housing Federation raises SE housing concerns
Housing associations say the south-east's housing shortage is as bad as ever. New National Housing Federation (NHF) - South East research states: "There has been little change in the overall housing situation" over the past three years, despite a slow rise in the pace of house building. "The picture is still bleak for huge numbers of people trying to meet their housing needs in all parts of the market."
According to NHF, the average house price is 8.7 times the average income. A mortgage to buy the average property requires an income of at least £60,000 - twice the average salary. Even a dual income couple with above average salaries are finding buying a home a struggle, which puts "enormous strain on household finances and makes starting a family harder to contemplate".
While private developers constructed 21,000 homes last year, exceeding the target laid out for them in the regional planning guidance (RPG), housing associations only built 7,297 affordable dwellings, just two-thirds of the 12,000 the RPG says is needed, and not much more than the 4,199 social homes lost through the right to buy. NHF says the effect of this shortfall can be seen in the 15% growth of council housing waiting lists during the past year, to 169,000 across the region - 51% higher than in 1999. (Guardian)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation