A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
HBF News
HBF meet Conservative Housing Spokesman
HBF Executive Chairman Stewart Baseley met Conservative Shadow Minister for Housing, Michael Gove MP, on 29 June. Discussions covered the Thames Basin Heaths Special Protection Area problem, environmental issues and Home Information Packs as well as the main planning policy issues. Mr Gove was keen to be kept informed of developments in HBF thinking and offered to facilitate dialogue with colleagues involved in the current Conservative policy review process.
..and GOSE on the Thames Basin Heaths
Also on 29 June, Stewart Baseley and a number of HBF members met the Government Office for the South East (GOSE), the DCLG, English Nature and PINS to discuss the position on the Thames Basin Heaths Special Protection Area. The government representatives summarised what they were doing to help in the shorter and longer term, but could offer no immediate way of cutting through the problem. HBF stated that we would be raising our concerns with the DCLG Secretary of State, Ruth Kelly, at our forthcoming meeting with her on 11 July.
PGS study commissioned
The HBF, in conjunction with the British Property Federation (BPF), Confederation of British Industry (CBI) and Royal Institution of Chartered Surveyors (RICS) have commissioned Knight Frank to investigate the impact of the proposed Planning–gain Supplement (PGS). The study will look at around 20 case studies to analyse how PGS would operate and compare land values of sites should it be introduced. The report will be finalised by September with a view to feeding the results to the Government ahead of the expected further announcement on PGS in this year's Pre-Budget Report.
Jeremy Edge, who is head of planning at Knight Frank and will be leading the project, said: “We are delighted to be working on such an important project and I am sure that the government will welcome the supportive and joined-up approach being taken by the property industry. This research will bring much needed clarity as to the effects of PGS and allow the industry to plan a continued path of success built around the fairest and most appropriate revenue system which will reap the most rewards for local communities.”
HBF Planning Conference
This year’s Annual Planning Conference looks at both the new challenges within planning resulting from PPS3 and the implementation of the Planning and Compulsory Purchase Act 2004, and the issues concerning the provision of affordable housing. Speakers include Colin Byrne, DCLG, Michael Gove MP and Steve Douglas, Housing Corporation.
The events will be in Milton Keynes on Thursday 14 September. For more information please contact the HBM Events Team on 020 7960 1646.
Economic News
Economic growth revised up
The economy grew marginally faster than was previously estimated, according to the third estimate of first quarter Gross Domestic Product (GDP). Growth over the quarter was revised up by 0.1% to 0.7%, while the economy grew by 2.3% (also 0.1% higher than previously estimated) from the first quarter of 2005. Both the manufacturing and construction sectors witnessed growth of 0.9% over the quarter, while the business services and finance sector expanded by 1.0%. (First Quarter National Accounts Release)
Political News
Report highlights potential economic consequences of HIPs
A report by Oxford Economic Forecasting, commissioned by mortgage lenders GMAC-RFC, investigated the potential impact on the economy if the introduction of Home Information Packs (HIPs) were to lead to a fall in the number of housing transactions. The scenarios investigated were based on the assumptions that transactions fall by 25% initially and rise by 2% per year thereafter, and a 10% decline followed by a 1% rise per year thereafter.
These assumptions were found to feed through into lower Gross Domestic Product (GDP) by 0.2% to 0.5% initially. This is largely due to reduced labour mobility, which is expected to lead to a higher unemployment rate. The South East and London would see the largest impact in absolute terms, but the largest impact in terms of a share of GDP would be felt in the South West. (Full Report)
HBF Comment: HBF Executive Chairman Stewart Baseley issued the following press comment on the report: “Home Information Packs were intended to help consumers make informed decisions. The latest research, however, shows that HIPs could have a serious impact on the housing market, with significant consequences for housing supply and affordability as well as jobs and the economy. As a matter of urgency, the Government needs to undertake a comprehensive dry-run of the scheme and be prepared to learn the lessons - whatever they may be. We need to ensure that consumers do not become the unintended losers of a scheme set up to serve their interests."
Government attacks report
The Government meanwhile described the conclusions as based on unfounded assumptions. The Department for Communities and Local Government (DCLG) commented: “The idea that the introduction of Home Information Packs will increase unemployment by 93,000 is simply nonsense. In Denmark, the number of transactions increased when the Packs were introduced, rather than fell in the year after the Packs were introduced. The reality is that the level of sales depends on much wider issues in the housing market and wider economy that change over time, such as interest rates and earnings.“ (DCLG Response)
Corporate News
New Chief Executive at Barratt
Barratt Chief Executive David Pretty is to retire at the end of this year and will be replaced by Mark Clare, currently Managing Director of Centrica’s British Gas Residential Energy operation. Mr Pretty stands down after 27 years at the company, 16 on the main board and 4 as Chief Executive.
Chairman Charles Toner said: “Under David's leadership the Group has announced successive years of record growth in volumes and pre-tax profit. He will leave the business well placed to continue its success into the future and we wish David and his family a long, happy and well deserved retirement. The Board is delighted to have secured someone of the calibre of Mark Clare asits Group Chief Executive. His outstanding track record and experience as a FTSE 100 Managing Director, combined with the very strong Barratt management team he inherits, gives us an exceptional blend of skills inside the Board.” (Barratt's Press Release)
Profits and volumes up at Berkeley
The Berkeley Group announced that pre-tax profits for the twelve months to 30 April rose by 6.2% from the preceding twelve months to £165.1m, on turnover of £917.9m. The Group sold 3,001 units over the period, up from 2,292 over the preceding year, although the average selling price slid from £309,000 to £293,000. Chairman Roger Lewis commented: "The housing market remains satisfactory across Berkeley’s principal areas of activity – a feature we owe to the continued feel-good factor, especially in London, coupled with strong employment, low interest rates and limited supply.” (Berkeley Group Results)
Persimmon report a rise in reservations…
In a trading update ahead of its interim results (which will be published on 22 August), Persimmon announced that sales reservations on a like-for-like basis in the first six months of the year were around 7% higher than the same period in 2005. Total legal completions (which are not directly comparable to last year after the acquisition of Westbury at the turn of the year) totalled around 8,000 in the period and were described as “a strong sales position to have achieved at this stage of the year.”
The company commented: “The housing market continues to be active and is operating at a satisfactory level which provides us with the opportunity to develop further our business. As previously stated, we expect to see a modest level of price inflation this year in both selling prices and build costs.” (Persimmon Trading Update)
… as Executive Chairman criticises HIP plans
Persimmon Executive Chairman John White attacked the Government’s plans to introduce Home Information Packs (HIPs) and called for their abolition. Mr White commented: “HIPs are mooted to prevent gazumping and speed up the house buying process, but they won’t achieve either of these things. They may even slow down the market by reducing the number of properties put up for sale, which would lead to a surge in house prices.” (The Times, 27 June)
Housing Market
House price growth eases in June
House prices rose by a seasonally adjusted 0.3% in June, to stand 5.0% higher than a year ago, according to Nationwide. The rate of price growth slowed noticeably in the second quarter, rising by 0.6% compared to a 2.3% rise in the first quarter of the year. Looking ahead, Nationwide highlighted supply as a key factor that will support prices. Group Economist Fionnuala Earley noted that the official household projections show “clearly that at current rates of house building there will continue to be significant undersupply of housing at the assumed household formation rates. Not all of this is in the owner-occupied sector, but as this and the private rented sector together account for around 80% of all tenures, it is clear that there is a significant amount of pent-up demand which will help to support house prices into the future.” (Nationwide June House Price Press Release)
London continues to lead price growth
House prices rose by 0.6% over June, to stand 2.4% higher than a year ago, according to Hometrack. London saw a relatively large increase of 1.1% over the month, while areas further from the capital saw more subdued growth. Hometrack remain upbeat on the market, but expect the rate of increase to slow somewhat. Director of Research Richard Donnell commented: “Whilst there is clear momentum in the market we believe that a modest cooling in the rate of growth is likely over the second half of the year.” (Hometrack's June Survey)
Mortgage lending accelerates in May
The number of mortgage approvals in May rose to a seasonally adjusted 117,000 in May, a fairly sharp rise from 106,000 in April, according to the Bank of England. Approvals in May were up 28% compared to a year ago on an unadjusted basis. The volume of approvals had picked up quite sharply in the second half of 2005, peaking at 120,000 per month at the turn of the year, before easing somewhat in recent months and the latest data is the highest level, other than the December/January peak, for two years. (Bank of England Press Release)
Other News
EP laud benefits of Design for Manufacture Competition
Regeneration agency English Partnerships have highlighted the benefits and lessons learnt from the Design for Manufacture Competition, where homes were built with a target cost of £60,000. EP highlighted a number of major points in “Design for Manufacture – Lessons Learnt”. The report claims that construction costs can be tamed without sacrificing quality, and that it is possible to achieve higher density with houses, not just flats, and include gardens and parking spaces, reducing cost doesn’t mean reducing size and that good design can dramatically reduce energy bills.
EP Director Trevor Beattie commented: “This publication pulls together all there is to know about Design for Manufacture, from why the challenge was so necessary, to what we’ve learnt and plans for the future. The competition pushed the boundaries of housebuilding in the UK and we now need to look at ways to bring the lessons learned from this project into mainstream housebuilding.” (EP Press Release)
Number of applications being refused remains high
The share of planning applications for major residential developments (defined as being for 10 or more units) being refused planning permission remained high in the first quarter, according to the Department for Communities and Local Government. 35% of such applications were rejected in the first three months of the year, a share that has remained fairly constant over the last two years, but is higher than at any other time for data that was first published in 1992. The share of planning decisions being made within 8 weeks of application remained unchanged from the preceding quarter at 13%, while the share decided within 13 weeks increased slightly to 64%. (DCLG Press Release)
New homes to be built on old hospital site in Colchester
English Partnerships (EP) announced that it is seeking a developer to purchase the Turner Village site, 1.5 miles north of Colchester. The 9.7 hectare site would accommodate around 420 new homes and a primary school. Developers have until 12 September this year to submit an offer. (EP Press Release)
CPRE and Policy Exchange go to war
The Campaign to Protect Rural England (CPRE) published a pamphlet attacking think tank the Policy Exchange’s series of reports which called for a radical market orientated reform of the planning system. The CPRE accused the Policy Exchange of making bizarre assertions and using “dodgy statistics”. (CPRE Report)
In response, Policy Exchange Director Nicholas Boles said: “"The reason [for the attack] lies in the CPRE's determination to prevent rural and suburban communities from building on rural land at any cost. This means that more and more people are unable to live in the type of homes they want - detached houses with outside space - and that young people are increasingly priced out of the communities in which they grew up. Britain needs to build more houses, but we need to do this in a way that improves the quality of life of the majority, not one that merely protects the way of life of an elite. This can only be done if local communities are given the power and incentives to develop at a pace that meets the needs of all their members, not just a few."
Shortlist for Housebuilding Innovation Awards announced
Housebuilder magazine announced the shortlist for the Housebuilding Innovation Awards, which will take place on 10 October 2006 at The Savoy, London. For a full list of the nominees click here
Consultation/Key Publication Dates
Code for Sustainable Homes Implementation Autumn
Home Information Packs (HIPs) Revised Regulations 14 June
HIPs – 10 to 12 planned trials Autumn 2006
HIPs Introduction 1 June 2007
Consultation on DCLG structure June 2006
Implementation of new DCLG structure September 2006
HBF Events
HBF Graduates Conference 12 July
HBF Annual Planning Conference 14 September
For a full list of HBF events please visit HBF Events & Meetings
For details of HB Media events click here
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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