A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, the HBF's head of media. Available to members only.
Halifax Latest: Prices Fall 0.6%…
Halifax figures released today say prices fell by 0.6% in August. This is the largest fall since December 2000 and the first since August 2002. But the bank played down its figures saying the monthly fall was just part of “normal fluctuations” in the housing market which is still underpinned by the strong economy and low debt-servicing costs. It also pointed out that according to its own figures, average prices are still 21.3% higher than a year ago. However, the pessimists are taking these figures as evidence that their predictions will be correct. Cambridge Econometrics, said: “The indications are that the over-valuation in the market is being clawed back. Prices are too far ahead of incomes. That is why we have lost first time buyers. When any market loses its new entrants you know the writing is on the wall.” (BBC)
…Prices Rise by 0.1% - Nationwide
UK house prices rose just 0.1% in August according to the Nationwide. This brings the annual rate of rises down to 18.9% from 20.3% in July. However, the building society was also relatively upbeat about prospects. “The weight of evidence suggests that market activity has slowed more markedly than price growth. While we don’t expect agreed prices to decline, the trend on price growth is expected to remain on the weaker path for the rest of the year,” said its chief economist, Alex Bannister. The building society also issued a warning similar to the Yorkshire Bank (see below) “Payment shock will rise over the coming year,” it said. (BBC)
Mortgage “Timebomb” Warning
The Yorkshire Bank has delivered a warning of a largely unreported threat to the housing market. It believes that as thousands of cheap fixed-rate mortgage deals come to an end, the surge in payments experienced by these mortgage-holders could trigger serious problems. To illustrate, a £250,000 mortgage taken out on a 3.5% fixed rate costs £700 a month. However, this will typically double to £1,400 at the end of the fixed period. Although lenders reassured these borrowers that they could refinance at the end of this discounted period, if prices fall, even slightly, many will not have the equity necessary to meet the refinancing requirements. They would therefore be forced to stick with their original lender at the standard variable rate. The Yorkshire Bank said large numbers of borrowers could fall into this “elephant trap”. (Express)
Bank Confirms Housing Market has “Turned”
Bank of England figures show the number of mortgage approvals in July recorded their steepest monthly fall since 1990. Future figures are likely to show approvals falling by 30% in the past two months alone. Whilst there was no official comment from the Bank, a string of leading economists have concluded these figures confirm the market has turned. Echoing general sentiment, Stewart Robinson of Lombard Street Research, said:“ You can’t argue with these figures. The message seems very clear - the market has turned.” The issue has generated a huge amount of media coverage, comment and analysis but the overall prognosis remains fairly benign. (All media)
HBF Note: Whether these figures indicate future price falls or simply a rather abrupt “soft landing” is the question. The answer is likely to be found in house price index figures over the next couple of months.
Wilson Bowden Renews Attack on Slow Planning…
The Government’s attempts to speed up the planning system are failing. Its efforts to make councils decide on applications within 13 weeks is being thwarted as councils simply dismiss the applications to meet their deadline rather than give them proper consideration. Ian Robertson, Wilson Bowden CEO, said: “The suspicion is that they are responding to the deadline by refusing more applications.” This results in a huge increase in appeals to the Planning Inspectorate which itself has admitted its workload is so great that each case may take a year to process, rather than the 12-week target it has been set. Ian Robertson made his comments as he announced a 26% increase in half-year results with sales 21% higher at £593m. Shares were marginally down 5p to 1100p. (Telegraph)
…and Says Homebuyers are Demanding More
Buyers are taking longer to decide whether and what to buy and are getting more demanding for free fixtures and other incentives. Wilson Bowden Chairman, David Wilson, said: “While we are still achieving a healthy number of reservations each week, there are some signs of sales becoming tougher to achieve as incentives begin to rise and sales take longer to sign up.” (Express)
Stockmarket Dismisses Market Fears
The stockmarket, at least, is dismissive of threats to the housing market. Housebuilder stocks bounced back this week as investors’ demonstrated their confidence in the sector. Bellway increased 37.5p to 790p; Bovis Homes rose 18p to 570p; Westbury climbed 12.5p to 440p; George Wimpey rose 12p to 429.5p and Redrow was 10p higher at 370p. (Telegraph)
Blair Renews Promise of Extra Housebuilding
In a speech marking his return to Downing Street after the summer, Tony Blair has listed government’s priorities over the next six months. “Housing, increasing the supply of housing and giving more help to people to get on the housing ladder”, was listed second on his 11 priority areas. (Independent)
Cherry Launches Countryside Takeover Bid
Alan Cherry, Chairman of Countryside Properties, has launched a takeover bid for the company he founded in a move that has made the share price rocket 36%. Backed by other members of the management team, including his son Graham, Chief Executive, and Richard, Graham’s brother, the bid is being seen as a “opportunistic” effort aimed at taking advantage of a recent fall in the share price that followed a profits warning in April. The approach bid is thought to be between 270p and 280p per share - about the level the stock was trading at before the warning. Although in a statement the company said the bid was at a very early stage, the Cherry family’s 20% stake in the company puts them in a strong position. Shares jumped 70p to 265p on the news. (Times, Telegraph, Independent)
Prescott’s Housing Schemes are “Forced Migration”
John Prescott’s pathfinder scheme for the North has been likened to forced migration on a scale of the Highland clearances or post-war redevelopment of the East End. The planned demolition of thousands of unfit homes in the Midlands and North has run into substantial local opposition with residents saying Prescott is destroying the sustainable communities he is trying to create. A pressure group, SAVE, says most of the houses earmarked for demolition and replacement are in “fair” condition and accuses Prescott of “social engineering” on a massive scale. (Telegraph)