A weekly news summary covering all aspects of the housebuilding industry. This week's bulletin is written by John Slaughter, the HBF's director of external affairs. Available to members only.
Chancellor’s Pre-Budget Statement
The Chancellor generally kept to relatively safe and tactical political ground in what will probably be the last such statement before a general election.
There were no substantive new initiatives directly relating to house building, although there were a number of points of interest for the business climate within which the industry operates. John Stewart is circulating a separate briefing note on the main points in the statement.
Headline Forecasts
The Treasury predicts GDP growth of between 3 and 3.5% in 2005, well ahead of forecasts by most independent forecasters and the Bank of England which put growth at around 2.5%. Consumer spending growth is expected to slow to around 2.5%, from 3.25% in 2004. Consumer price inflation is predicted to rise to 1.75% in 2005 Q4, below the 2% target.
HBF Note: It is difficult to reconcile the views of the Treasury and Bank of England. The Bank believes the economy has reached full capacity, so that growth above trend - as predicted by the Treasury - would be inflationary, and would therefore require higher interest rates. By contrast, the Treasury believes there is spare capacity in the economy, so that above-trend growth will not be inflationary. If the Bank were to accept the Treasury’s GDP forecast, we would be more likely to face higher interest rates.
Skills
On other points of interest to the industry, The Chancellor announced the roll out of the National Employer Training Programme across the country, which is designed to enable every employee who missed out at school to have the funds and opportunity to acquire skills, initially to NVQ Level 2 standard. This will be delivered via “time off, free training and help for employers”.
HBF Note: We will now establish and consider any implications this statement may have for the new skills initiatives just announced by the Majors.
Political comment on the Pre-Budget Statement
The opposition parties drew attention to what they see as the black hole in the Chancellor’s forward financial projections.
Shadow Chancellor Oliver Letwin’s response was that “It’s been alchemy in reverse. The golden rule has turned to dross in his hands….All talk. He is borrowing to spend….Why do the CBI, the OECD, the BCC, and the CEBR all say that, on his spending plans, he will have to raise taxes? Why do 20 of the 21 economists on the Treasury’s own panel say the same thing? Doesn’t he feel a little isolated?”
New Poll Shows Support for Abolishing Stamp Duty
A new poll by ICM for the Woolwich showed that 79% of a sample of homeowners questioned think stamp duty should be scrapped for first time buyers and 64% also think the thresholds for stamp duty should be raised. Chief Executive of the Taxpayers’ Alliance, Matthew Elliott, said: “Taxpayers across the country would welcome the abolition of stamp duty for first time buyers and an increase in the thresholds as good preliminary steps towards the complete abolition of stamp duty.”
HBF Note: HBF has of course lobbied for an increase in thresholds and other reforms to stamp duty in its recent budget submission.
OFT Targets Construction and Housing
The Office of Fair Trading has published a draft annual plan, listing “construction and housing” as one of its top priorities for attention in 2005. John Vickers, OFT chairman, said “We have for the first time signalled the priority areas in which we plan to make the most positive difference. We think of ourselves as being more proactive, and we wanted to signal these priorities more clearly.” The draft plan is open to consultation until 31 January.
HBF Note: As there is little detail in the draft plan, given the Barker recommendations on customer satisfaction the targeting of construction and housing is clearly meant to send a message about the need for progress.
Social Inclusion
The Housing Corporation has published its proposals for running an initial competition for the award of £200 million of Social Housing Grant open to private housing providers as well as RSLs. The proposals are open for consultation until 11 January. The key criteria proposed would align delivery with existing and evolving Corporation objectives such as the use of Ecohomes standards and MMC as well as matching the priorities for housing need set out in Regional Housing Strategies. The Corporation is aiming to make grant awards to applications of 400 or more units and is also asking for expressions of interest to be registered by 11 January.
House prices - Optimists and Pessimists
Nationwide is predicting a 2% overall increase in prices next year. Halifax, reporting on 3 December, has forecast a 2% fall next year.
The Regional Politics of Housing Growth
The South East England Regional Assembly (SEERA) has opted to go out to consultation on the draft South East Plan with housing options figures lower than those required to meet the Government’s strategy for a growth in housing supply. SEERA chose to consult on options of an annual provision of between 25,500 and 32,000 rather than 29,500 to 36,000 as had been proposed. This decision was based on a range of arguments relating to the inadequacy of current transport, water and sewerage infrastructure. SEERA’s position represented a difference of view between majority Conservative representatives and others. The CBI’s regional director, Douglas Horner, commented that chronic under-supply would hit the most disadvantaged and threaten the regional economy.
HBF Note: We have already raised our concerns with the ODPM and will shortly have opportunities to voice them direct to Ministers in forthcoming meetings. We will also be taking up the issues with the Assembly.
Meanwhile…
Denis Lenard, chief executive of Constructing Excellence, is to chair an infrastructure taskforce to advise the government on its housing regeneration programmes. The taskforce could offer advice on all public sector projects throughout the country, but it will pay particular attention to the transport and social infrastructure required for large regeneration projects such as the Thames Gateway.
According to the Institute for Public Policy Research, however, the South East will be unable to support any further economic growth without destroying its residents’ quality of life. Even slowing growth will not be enough to tackle the region’s environmental and resource shortages. (Source: “Planning”)
Construction Health and Safety
Health and Safety figures for 2003/04 show that the rate of fatal injuries in construction was 3.5 per 100,000 workers, a fall from 3.8 in the previous year. The HSE is calling for tougher penalties for safety breaches to cut accident rates.
Raven Mount
Housebuilder Raven Mount is planning to buy the privately held property development business Raven Group in an all-share deal worth up to £40 million. AIM-listed Raven Mount was set up by property entrepreneur Anton Bilton in November 2003 to take over housebuilder Swan Hill in a £46.8 million deal. The board intended to sell Swan Hill in June but talks with potential bidders foundered over the size of the firm’s pension deficit.
Now the independent directors of Raven Mount have recommended the offer for Raven, the Knightsbridge-based private business controlled by Bilton and Bim Sandhu. Bilton becomes executive chairman, while Sandhu becomes chief executive.
LMS GOES RESIDENTIAL
London Merchant Securities, the property group, is overseeing a range of residential projects for the first time in a generation. The company, which has not done any housebuilding since the 1970s, has several mixed-use projects in development.
LMS is doing more development work, says its chief executive Robert Rayne. It had Pounds 900m of investment property and Pounds 300m of property in development. He said: "The last time we had a big development programme was 1990 and that was about Pounds 100m." LMS's increased focus on development came as property companies were finding it harder to buy buildings with growth potential at the right price.