A weekly news summary by Pierre Williams, the HBF's head of media, covering all aspects of the housebuilding industry. Available to members only.
Halifax Records January Price Recovery
The Halifax recorded a 0.8% increase in house prices in January, bringing the annual price rise to 13.7%. This figure backs up strong circumstantial evidence from housebuilders who reported a strong rebound in site visits during the month. A Halifax spokesman said: “The ongoing strength of the UK economy and the labour market remain solid foundations for the housing market, ensuring that it remains in good health. These latest figures suggest the market is undergoing a reassured slowdown.” The latest website survey on confidence also suggests a huge resurgence in buyer confidence with 52% of househunters now expecting prices to increase this year compared to just 30% a month ago. (All media)
Recovery Increases Pressure for Rate Rise
The strength of the recovery, combined with a separate report showing that the service sector economy is expanding at a faster rate than expected has increased speculation that interest rates may have to rise. However, the picture is far from clear, with some commentators expecting the latest house price recovery to be short-lived, so easing upward pressure on rates. (FT, Telegraph, Times)
But Treasury Forecasts a Fall
Earlier this week the Treasury forecast that house prices would fall by about 1% this year. But in 2006 and 2007 it expects a slow recovery in prices in line with earnings. The forecast suggests leading lenders and the Treasury have a similar outlook on the future of the housing market. This unity of thinking may help cement the hoped-for soft landing of the market. The Treasury’s acceptance that house prices are unlikely to fall relative to earnings demonstrates that it believes most of the increase since the late 1990s is permanent. (FT)
Prescott’s “Slums for All” Attacked
The government’s plans for new housebuilding have been attacked by the Commons’ Environmental Audit committee. The Tory-led committee said the development proposals would create serious environmental problems, notably in traffic congestion and water shortages. The committee chairman, Peter Ainsworth MP, said: “I accept the need to improve housing supply but, as things stand, the principal beneficiary of housing growth will be property developers, with the environment we all depend on being the principal loser. Failure to fund the necessary infrastructure will lead to badly-built homes, in poorly-designed communities, with inadequate transport and public services.” (Telegraph, Guardian)
Country & Met Booms on Low-Cost Formula
Boosting volumes of lower priced homes is proving a winning formula in the current market. And Country & Metropolitan is on track to meet profits forecasts by concentrating on this strategy. In the year to the end of June, the company built 725 units. This year it is on course to complete 950, mainly in the north. CEO Stephen Wicks explained: “Despite the gloom we are going great guns. It all comes down to strong demand as long as people can afford to buy. Affordability is the key thing.” Shares rose 9p to 203.5p. Interim results are expected in mid-March. (FT)
HBF Note: This is a winning strategy, both in terms of profitability but also politically. That said, increasing volumes and prices seems to be working just fine for Bellway - as below.
Bellway Boosts Volumes and Prices
Bellway has boosted both volumes and prices in the six months to the end of January, compared with the same period the previous year. Volumes were up 7% and average prices up from £156,000 to £165,000. An emphasis on the North has helped and forward sales are excellent with 86% sold for the full year (until July). Despite prospective buyers taking longer to commit, Finance Director Alistair Leitch said business was still brisk. “People are coming five or six times and then putting their money down. It is not like last year when there was almost a frenzy”. Shares edged up 2p to 863p.
HBF Note: The Times is clearly a Bellway fan. Its investment column says: “Bellway is the City’s favourite housebuilder. The company, biased towards the budget end of the market and to the north of England, scores at or near the top of the class on financial measures such as return on capital, operating margins and forward sales. If it wasn’t for the psychological scars of the housing market crash of the early 90s, Bellway’s shares would be double their current valuation.”
Of course if the Times is right and we see the soft landing materialise, then these “scars” should fade. And that bodes well for every listed housebuilder.
Wates Meets Prescott’s £60,000 “Challenge”
In response to John Prescott’s challenge to housebuilders to build homes for £60,000, Wates has come up with a range of houses and flats that will cost between £55,000 and £85,000 to build. The two-storey, two double-bedroomed homes, which will be built on the outskirts of Coventry, will be of traditional brick and block. But Wates has had to shave £7,000 off standard construction costs by altering layouts to meet the target cost. Mr Prescott’s office said it was “delighted” housebuilders were responding to the challenge. (FT)
Treasury’s Stamp Duty Bonanza
The Treasury’s take from the housing market is set to grow by 13% this year. Stamp duty will be by far the biggest earner, netting the government an estimated £4.3bn this tax year - nine times as much as a decade ago. Campaigners have jumped on the figures to renew their demands for the Treasury to ease stamp duty, particularly for first time buyers. However, Treasury officials have denied to comment on whether they are reviewing the levy. (All media)
HBF Note: It’s worth noting that developers and homeowners are usually branded “greedy” as a result of the rising market. But it’s worth noting that whilst stamp duty receipts have risen by 900% in 10 years, house prices have “only” risen 250% over the same period.
Calls to Curb Riverside Development
Campaigners have launched an attack on riverside development. A report by a coalition of local environmental groups says policies detailed in London mayor Ken Livingstone’s “Blue Ribbon” network - designed to protect the Thames - are being ignored. It claims swathes of riverside and canals are being blighted by “unsympathetic developments”. Livingstone has promised to review a dossier of developments compiled by the group. (Guardian)