A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
ITEM club cuts growth forecasts
The influential Ernst and Young ITEM Club cut back its GDP growth forecast for 2005 in its latest Economic Outlook for Business from 2.7% to 2.1% and expect economic growth of 2.6% next year. The Bank of England’s repo rate is forecast to be cut by 25 basis points at the August MPC meeting. The Club comment that: “The slowdown in consumption is vital for the economy to rebalance”, but “The fundamentals for the consumer are improving as savings rebuild balance sheets and the housing market stabilises. The forecast shows the high street picking up just before Christmas.”
On public finances, the ITEM Club comment: “The slowdown in the economy is bad news for the Chancellor because public finances are particularly sensitive to changes in the growth rate. Moreover, the weakness in the economy means that he will have to delay the necessary fiscal correction beyond next year’s Budget, piling up trouble for later years.” (www.ey.com)
Political Events
Home Information Packs come a step closer
Housing Minister Yvette Cooper announced that there will be a dry run to test all aspects of the Home Information Pack. Ms Cooper said: “The programme’s development, including proposals for the Home Condition Report Registers and the ‘dry run’ in 2006 is in good shape and industry involvement with government should ensure that public confidence continues to grow in the build up to the packs’ introduction early in 2007.”
The dry run will track a representative sample of transactions, by buyers, sellers and others involved in the process, from the point of enquiry through to completion. The cost of the packs will normally be met by the seller. The ODPM said draft regulations covering the legal content of the packs will be published soon, followed by drafts later in the year covering search information, the Home Condition Report and Certification Scheme and the way in which Home Condition Report Registers are to be held and accessed. (www.odpm.gov.uk)
Housing market
Nationwide report that house prices edged up in July
Nationwide reported a modest 0.2%, seasonally adjusted, rise in house prices in July, to leave prices 2.6% higher than a year ago, the lowest rate of annual increase since May 1996.
Nationwide expect affordability to improve, but the general picture for the market will be determined by the wider economy. Group Economist Fionnuala commented: “A rate cut would provide some stimulus to the housing market,
through its impact on affordability. The annual rate of house price growth is now below wage growth for the first time since May 1996. This, in combination with the effect of lower interest rates on mortgage payments, will help to improve affordability. But a fall in rates is unlikely to cause acceleration in the rate of house price growth at this point in the cycle, particularly if labour market conditions worsen. The actual impact will depend on what happens next in terms of general economic sentiment.” (www.nationwide.co.uk)
Hometrack report a further fall in prices
Hometrack’s July survey revealed a 0.2% fall in house prices over the month, the 13th straight month of falling prices. The average national house price now stands 3.7% lower than a year ago. Sales were reported to have risen by 3% over the month, following on from a 3.5% increase and a 7.6% rise in the two preceding months. Sales prices as a percentage of asking prices fell marginally to 93.4%, while the average time taken to sell a house rose to 7.8 weeks, up from 7.6 weeks the previous month.
Hometrack’s housing economist John Wrigglesworth commented: “House prices have been falling for well over a year now. We now expect prices to fall by 5% this year, before levelling off in 2006.” (www.hometrack.co.uk)
Soft landing in site says Halifax
The Halifax has predicted that the housing market will experience a “soft landing” with prices falling by an average 2% this year. The mortgage lender said house prices had developed in line with its predictions in the first six months of the year. The company’s chief economist Martin Ellis said: “The UK housing market is on course for a gentle slowdown. We continue to expect a 2% fall nationally in house prices this year.”
Mr Ellis added: “This slight decline should be set against nine consecutive years of rising prices, during which the average home in the UK increased in value from £61,564 to £162,850.” (The Guardian)
Mortgage approvals stable in June
There was further evidence that the level of mortgage approvals has stabilised after recovering from a sharp decline late last year. The Bank of England reported that 96,000 loans (seasonally adjusted) were approved for house purchase in June, an unchanged level from May. While 12% lower than a year ago, approvals were 25% up on the low seen last November. (www.bankofengland.co.uk)
Other News
Major Home Builders Group commits to qualify 200,000 workers by 2010
The Major Home Builders Group (MHBG) announced it is moving forward with its initiative aimed at having only qualified operatives on its sites by December 2010 -through its partnership with ConstructionSkills. MHBG members will be writing to their sub contractors to advise them that by December 2007 they will expect construction operatives on their sites to have a CSCS card with the aim that they will be qualified by December 2010.
The partnership between MHBG and ConstructionSkills will tackle skills shortages and training issues in the home building industry. The affiliation is part of the construction industry’s Sector Skills Agreement, which aims to develop partnerships between the industry, training providers and government in order to raise skills standards in the construction industry as a whole.
Since its inception in 2001, the ConstructionSkills Qualifying the Workforce initiative has more than doubled the number of workers registered through the CSCS scheme.
700,000 CSCS cards have been issued to date
Over 725,000 individuals have passed the Construction Health & Safety Test since its launch in 2000
The number of construction NVQ registrations has risen year on year since 2001, from 26,000 to over 95,000 registrations in 2004
Support will be available to all those operatives joining the scheme through CITB Grant - either directly as a CITB-ConstructionSkills registered employer or, if they are not registered, they should be able to claim through the MHBG member firm.
HBF has already contacted members on this issue and will be looking for further member participation going forward.
70% of new dwellings built on Greenfield land
Updated provisional estimates for residential development released by the ODPM show that 70% of new dwellings (including conversions) were built on previously-developed land in England in 2004, up from an earlier estimate of 67%. This is an increase from 67% in 2003 and 2003, a figure which had risen from the mid 50% range throughout much of the 1990s. In London, 94% of new dwellings were built on brownfield land.
The ODPM also reported that new dwellings were built at an average density of 40 dwellings per hectare (up from an earlier estimate of 39) in England in 2004. This is an increase from 34 dwellings per hectare in 2003 and 25 prior to 2002. (www.odpm.gov.uk)
IPPR report claims South East housing numbers are too high
A report from the Institute of Public Policy Research (IPPR) claims that the number of homes required to cut house price inflation was an extra 59,000 per year, considerably lower than that set out in the Barker Review. The research concluded that: “all the extra dwellings in the South East would need to be social or intermediate forms of housing.”
However, the report was rejected by the Campaign for More and Better Homes (a coalition of housing charities, businesses and homebuilders), with Gideon Amos from the Town and Country Planning Association commenting: “The IPPR’s analysis of the housing market in the South East is deeply flawed. It has acknowledged that the South East is the least affordable region in the UK outside of London, but in focusing on affordable housing, it has underplayed the challenge of building enough homes to ensure all those who need to live and work in the region are able to do so.” (Guardian, www.ippr.org.uk)
Minister praises new green development
Elliot Morley, Climate Change and Environment Minister, praised Berkeley Homes' efforts to help combat climate change through its environment-friendly refurbishment of homes in Acton, West London. Mr Morley said: "Climate change is one of the greatest threats we face today. We all have a responsibility to take action to reduce our impact on the environment. The work done by Berkeley Homes and its partnership with Future Forests is a good example of how business can take positive steps to address this issue, and should set a new example of good practice in the construction industry.” (www.defra.gov.uk)
Letter from Housing Ministers on improvements to building rules
Yvette Cooper, Minister for Housing and Planning wrote the following letter to the Independent on 25 July:
Sir: Claims from the Green Party that I have decided to drop regulations that would make homes more energy efficient (letter, 22 July) are wrong. I made no such announcement on 18 July.
The Government has been consulting on changes to Part L of the Building Regulations so that we can substantially improve the energy efficiency of new buildings and to introduce improvements in the spring of 2006, two years earlier than was originally planned. We are due to set out our detailed response to the Building Regulations consultation this summer.
Already, better regulations have substantially improved the energy efficiency of new homes. However, we believe we need to go still further and that is why the revision to Part L of the Building Regulations is so important. (Independent)
Deputy Prime Minister's awards for sustainable communities
The ODPM will run awards for sustainable communities again this year. The awards recognise people, projects and initiatives that contribute to making towns, cities and communities, including those in rural areas, better places in which to live and work. They pay tribute to those people whose commitment and enthusiasm are making a significant contribution towards the building of thriving and successful communities.
Deputy Prime Minister John Prescott said: "Sustainable communities would not be possible without those people and projects who make invaluable contributions to their local communities, day in, day out. That is why I am pleased to announce this year’s awards, which underlie our commitment to delivering sustainable communities, and I look forward to acknowledging to the leading entries early next year." (www.odpm.gov.uk)
Mortgage arrears and possessions rise, but still at very low levels
The Council of Mortgage Lenders reported that the number of repossessions and mortgage arrears rose over the first half of 2005, but remain extremely low by historical standards. The number of properties taken into possession rose to 4,460 (the equivalent of about 1 in 2,500 mortgages) in the first half of 2005, up from 3,070 in the first half of 2004. The number of mortgages in arrears of 6 to 12 months rose to 30,980 cases (0.27% of mortgages), up from 26,980 in the first half of 2004.
CML Deputy Director General Peter Williams commented: "It now seems clear that the second half of 2004 marked the trough in the number of mortgage arrears and possessions. Arrears and possessions now look set to rise a little, but only to the sort of levels experienced in the past few years. A re-run of the early 1990s is certainly not on the cards.” (www.cml.org.uk)
Infrastructure costs problematic for Prescott
Government advisors have warned ministers that without committing billions of pounds of funding for infrastructure Deputy Prime Minister John Prescott’s housing plans in the South East will be hard to deliver. A Milton Keynes partnership committee that includes English Partnerships and councillors has highlighted the scale of investment needed with the infrastructure price tag for proposed eastern and western extensions to the town expected to be between £1.2 billion and £1.5 billion by 2011.
Many believe an infrastructure tariff on the sites in Milton Keynes, the first agreed in the UK, will be a forerunner for Barker’s planning gain supplement which will help fund vital facilities such as roads, schools and hospitals. Developers will pay a levy of £18,000 for each house completed. This could raise around £270 million. Chair of EP Margaret Ford said: “Now that we have exposed the scale of the investment required in Milton Keynes I would look for some fairly rapid responses from other government departments and utilities on how feasible it would be to come to a view [of costs].” (Guardian)
Pathfinder demolition plans may be scaled back
Plans to demolish thousands of houses in the north of England are to be reviewed after it was revealed that house prices in the area are on the rise. In response to a select committee’s concerns about the controversial housing market renewal initiative, the government has suggested that it wants to scale back the number of homes up for demolition saying pathfinder areas would have to take into account changing market conditions.
Since 2002 average house prices at the cheaper end of the market in those areas have risen from £27,000 to £49,000, an increase of 81.5%. The response said: “We expect pathfinders to be able to respond to the changing market. We will examine critically the proposed balance between refurbishment, new build and demolition.” But it also said: “In some areas, the only option for providing a mix of housing meeting present day expectations is to replace less desirable homes with new ones.” (The Guardian)
Government denies Part L regulations are "watered down"
The government has strongly denied claims made by The Guardian newspaper that it has “watered down” building regulations supposed to be 25% tougher than the ones introduced in 2003.
The Guardian said that housing and planning minister Yvette Cooper wants to drop plans for energy efficiency improvements in existing homes which have an extension or are to be refurbished, with regulations for new buildings postponed until next year. The Guardian claims that the new regulations would only improve energy efficiency by 18% rather than the 20% to 30% the Environment Minister Elliott Morley was hoping for.
But Mr. Morley said: “I have no doubt about the ODPM’s commitment to delivery on the targets. I believe the ODPM is looking to go further than was planned and advise the industry to be wary of what they read in newspapers.”
A spokesperson for the ODPM said: "It was never the intention to make an announcement on Part L of the Building Regulations this week. The government's response to the Part L consultation is due this summer and we are on track to do so. Changes will be introduced in 2006 and there is no question of the regulations being 'watered down'. Already better Building Regulations are improving the energy efficiency of new homes, but we need to go further and that is why we are making these important changes." (Guardian, Housebuilder)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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