A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Bank of England Raises Bank Rate by 0.25 Percentage Points to 4.75%
The Bank of England's Monetary Policy Committee voted this week to raise the official Bank rate paid on commercial bank reserves by 0.25 percentage points to 4.75%.
The Bank’s commentary notes that “the pace of economic activity has quickened in the past few months. Household spending appears to have recovered from its post-Christmas dip. Business investment growth and investment intentions have also picked up. In the United Kingdom's main export markets growth has remained robust. As a result, over the past few quarters GDP growth has been at, or a little above, its long-run average and business surveys point to continued firm growth. The margin of spare capacity in the economy appears small.”
CPI inflation picked up to 2.5% in June, and is expected to remain above the 2.0% target for some while. Although the Bank expects energy price inflation to moderate in the medium term, some recovery in profit margins and pay growth is likely to mean that consumer price inflation will move only gradually back to the target.
More online:
http://www.bankofengland.co.uk/publications/news/2006/078.htm
….. and disappoints the CBI
In response to the Bank of England's decision to increase interest rates to
4.75%, Director-General Richard Lambert said that CBI member companies would be disappointed by this increase. The CBI’s hope is, however, that a modest rise now will remove the risk of a more significant increase later in the year. The CBI says the decision reflects the increasing pace of economic activity in recent months, and the inflationary pressures arising from high energy prices.
HBF Note: Commentators had said the Bank’s decision was likely to be finely balanced. In this context, John Stewart notes that while the rate increase is not in itself welcome, if it ensures a more stable medium-term path for the economy, the housing market would stand to benefit. Recent economic data - GDP growth, inflation, retail sales, most housing market indicators - have been quite strong, so the MPC's decision is not altogether surprising.
Housing Market
Halifax research points to spread of housing affordability problems
New research from Halifax shows that the average house is unaffordable for key workers in at least 65% of towns (339 out of 519) across Great Britain. Five years ago, the average house in only 126 (24%) of towns was unaffordable for all key worker groups surveyed.
In the most expensive town surveyed, Gerrards Cross in Buckinghamshire, the research indicated that it would take 30 times the average annual salary of ambulance staff to buy the average house. The research also showed that the problem has spread well beyond the South East. The problem is most acute in the South West. The average house price was unaffordable for five groups of public sector workers in all of the 34 towns in the region surveyed. In 2001, that was the case in only five towns. Martin Ellis, the Halifax's chief economist said, "Key workers have been hit by the strength of the property market over the past five years. Now it is difficult for key workers to buy the average house, not only in the south of England but also in significant parts of the Midlands, northern England, Wales and Scotland."
More online:
http://www.hbosplc.com/economy/includes/KeyWorkerAffordability(UK).doc
Hometrack’s measure of house prices rises at fastest rate for two years
Hometrack’s latest survey (released before the MPC’s decision on interest rates) shows house price inflation at its fastest pace in almost two years in July. A drop in new buyers points, however, to a slower property market ahead. The survey shows that house prices in England and Wales rose by 0.6% during the month to an average £166,500, taking year-on-year growth to 3.2% - Hometrack’s fastest recorded annual pace of increase since October 2004. "The growth in prices over July may seem at odds with the decline in demand," said Richard Donnell, Hometrack's director of research. "However, against the background of a limited supply of housing for sale, agents are still reporting continued upward pressure on prices, especially in southern England."
More Info from the Hometrack website
Halifax survey shows prices nudge upwards in July
The July survey of house prices from Halifax has shown a rise of 0.2% in July, following a decline in May and June. The price of an average house now stands at pounds 177,020, compared with pounds 163,445 a year ago.
The lender now believes house prices will end 2006 up 5%, having previously forecast growth of 3%. Its announcement came just hours before the Bank of England's monetary policy committee raised interest rates by a quarter point to 4.75%.
More online: http://www.hbosplc.com/economy/includes/HousePriceIndexJuly2006.pdf
…..and prices are predicted to rise this autumn
The Independent commented (again before the MPC decision) that house prices look set for a hot autumn after official figures showed the number of new mortgage approvals reached a five-month high of 120,000 in June.
Figures from the Bank of England showed that approvals - a precursor to movements in house prices two months down the line - were 3,000 higher than May's figure. However, the amount of money lent, both to buy a house and for day-to-day high street spending, both slowed in June, the Bank said.
More online:http://news.independent.co.uk/business/news/article1207679.ece
Political News
Planning obligations could help fund more affordable housing, says Cooper..
Planning Minister, Yvette Cooper has urged local authorities to make better use of "section 106" agreements to deliver more affordable housing and infrastructure.
Her call to action came as the Government published new guidance for local authorities and developers on how better to use planning obligations. The guide offers practical advice on how to improve the development, negotiation and implementation of section 106 agreements. It also provides real life examples of how to make the process quicker, whilst providing more certainty, and includes a model legal agreement prepared by the Law Society.
The Minister based her remarks on a recent study by Sheffield University which appeared to show that sixty per cent of medium and large and ninety per cent of minor residential planning permissions do not include s106 agreements at all.
More online at
http://www.communities.gov.uk/index.asp?id=1500817
HBF Comment:
HBF had previously raised a number of substantive concerns about the lessons drawn from the Sheffield research with the DCLG. In a press release, Executive Chairman Stewart Baseley said "The research by Sheffield University, on which Ms Cooper’s comments are based, should be treated with considerable caution. HBF’s own analysis, which has been shared with the Department for Communities & Local Government, has shown that the findings of this research significantly under estimate the proportion of residential sites that make a contribution to affordable housing and infrastructure requirements under current Section 106 arrangements.”
“In addition, sites without Section 106 agreements are mostly relatively small. Most larger sites already have a S106 agreement. The remaining smaller sites have only a very limited capacity to contribute to affordable housing or infrastructure through a planning obligations agreement.”
“There are real limits to the contribution any individual development can make to funding objectives such as affordable housing and infrastructure, especially given other significant considerations such as the cost of remediating brownfield land for residential and mixed-use schemes. We must be clear that the real answer to current housing affordability problems is to consistently build more homes so as to balance supply with demand and maximise the scope to make housing more affordable, including low-cost market and intermediate housing options."
…And Audit Commission highlights securing community benefits through the planning process
In its report “Securing Community Benefits through the Planning Process” published on Thursday, the Audit Commission highlighted that some councils are not making the most of the planning system to secure benefits for communities from new development. The Commission's report found that there is a wide variation in what councils gain through Section 106 agreements and that, as a result, some communities could be missing out.
HBF Comment:
In a statement Executive Chairman Stewart Baseley said, “It is certainly the case that the current Section 106 agreements can lead to delay and uncertainty in the development control process. Any guidance which encourages more speedy and efficient processing of planning obligations by local authorities is therefore to be welcomed.”
“A number of mitigating factors, including low-land value and significant pre-development costs, or the small scale of schemes, mean that some developments quite reasonably do not have Section 106 agreements.”
“Most larger sites already have Section 106 agreements, and placing extra burdens on developments could reduce the viability of housing schemes, and thus have an unwelcome adverse effect on the supply of new housing.”
EP vows to be more grant flexible than Housing Corporation
The Government’s regeneration agency is to hand cash directly to developers for the first time to kick start a scheme to provide 15,000 new homes for first time buyers.
English Partnerships expects to set aside around £300 million to buy shares in properties developed by private house builders and housing associations over the four year term of its first time buyers initiative.
Duncan Innes, director of the FTBI at the agency, said the competition’s first round, launched this week, should see £100 million spent on shares in 1,500 homes over the next two years.
“We are asking developers to put forward schemes that are well designed, well located and close to public transport. It is no problem if they are already built and is open to registered social landlords as well”.
More online at
http://www.insidehousing.co.uk/news/article.aspx?articleid=1447918
Corporate News
Wimpey beats its 25-year-old record for home sales
George Wimpey beat City forecasts with a 25 per cent rise in pre-tax profits and broke a group record for first-half house sales that it set 25 years ago. Wimpey completed 7,822 homes in the six months to 2 July, which helped to lift group profits to £152.3 million. Operating profits in the UK business rose 7 per cent to £114.9 million, boosted by a 28 per cent rise in completions to 5,854. However, the strong British sales figures came partly at the expense of gross margins, which slipped from 23.5 per cent to 19.3 per cent. Returns on average capital employed also fell, from 21 per cent last year to 15.6 per cent.
Other News
Currys to sell solar panels
Electrical chain Currys has announced (Financial Times, 31 July) that it plans to trial direct sales of solar panels to home owners from three of its stores – in Fulham, Croydon and West Thurrock. The company said it would cost about £9,000 to buy and install the panels in the average three-bedroom household. It stated this would be substantially cheaper than going to specialist suppliers, which currently charge up to £16,000, but it would still take an average household between seven and 18 years to recoup fully its costs. The company commented, “Currys has identified a clear demand for renewable energy solutions from customers. Market evaluation has revealed significant levels of interest.”
Rise of one-person house-holds cause strain on environment
The rising number of people living alone need to take part in collective housing schemes and share domestic facilities to prevent a future environmental "consumption crisis'', a report has claimed. The growth of "one-person'' living, particularly among middle-aged men, is likely to have serious implications, said Dr Jo Williams, of the UCL Bartlett School of Planning.
Her report states that one-person households are the biggest consumers of land, energy and household appliances in England and Wales - with men between the ages of 35 and 45 the worst offenders in Dr Williams’ view. Dr Williams said: "Previously, the typical one-person householder was the widow, often on a tight budget and thrifty. The rise in younger, wealthier one-person households is having an increasingly serious impact on the environment.''
Dr Williams suggests collective housing, relocation schemes and ecological homes to address the issue. The report also suggests a possible "occupancy tax'' on inefficient use of space.
More online: http://news.bbc.co.uk/1/hi/uk/5232028.stm
£17,677 to cut the parental purse strings
It costs parents £17,677 to get their children to fly the nest, according to findings by Alliance and Leicester Mortgages moving improving index.
Despite years of parenting, mums and dads still can’t let go of responsibilities – almost half (46%) of those planning to help out believe buying a roof over their children’s heads is still part of their parental duties.
More online:
http://www.alliance-leicester-group.co.uk/upload/originals/PR0208062.doc
SEERA publishes report on potential Thames Basin Heaths SPA mitigation sites
The South East England Regional Assembly has published a report which identifies potential plots of land which could act as mitigation public space for development taking place close to the Thames Basin Heaths Special Protection Area.
More online:
http://www.southeast-ra.gov.uk/news/releases/2006/31july.html
HBF Comment:
Commenting on the report, Executive Chairman Stewart Baseley said in a press statement, “Today’s announcement is a welcome step towards finding a solution to the effective moratorium which has been placed on development in the Thames Basin Heaths SPA area.”
“However, SEERA’s report recognises that further work needs to be done to establish ways of delivering the potential identified. It is essential therefore that the Government, SEERA and local authorities leave no stone unturned in taking early action so that businesses are not penalised unfairly, and potential homebuyers and key workers are not denied an opportunity to access the property market in the areas they need to live.”
“Given the current chronic shortage of housing in the South East and the subsequent impact on the price of housing, it is imperative that a speedy and lasting resolution is found to this issue.”
Consultation/Key Dates
Code for Sustainable Homes Implementation Autumn 2006
Home Information Packs (HIPs) Regulations:
Revised regulations published 14 June 2006
HIPs - 10 to 12 planned trials Autumn 2006
HIPs Introduction 1 June 2007
Implementation of new DCLG structure September 2006
HBF Events
HBF Annual Planning Conference 14 September 2006
Housing Market Intelligence 2006 10 October 2006
Housebuilding 2006
Business Design Centre, London N1
10 &11 October 2006
Visit http://www.housebuilding2006.com/ for more information.
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View a full list of HBF events
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John Slaughter
Director of External Affairs
Home Builders Federation