A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
The Bank of England Cuts Interest Rates
As had been expected by nearly all economic commentators and the financial markets, the Bank of England’s Monetary Policy Committee decided to cut the repo rate by 25 basis points to 4.50%, the first change in the rate since August last year.
The MPC appeared to hint that further cuts are not imminent. In the press statement accompanying the decisions the MPC commented: “In the first half of the year, output growth in the United Kingdom was subdued. Household spending and business investment growth have slowed. Although there are some signs of a pickup in consumer spending, downside risks remain in the near term. Looking further ahead, however, the rise in equity prices and the recent fall in the exchange rate should boost activity.” However, the publication of the quarterly inflation report next week will give a clearer picture into the likely path for interest rates.” (www.bankofengland.co.uk)
Political Events
Nicholas Macpherson confirmed as new Treasury chief
Nicholas Macpherson has been confirmed as the new Permanent Secretary at the Treasury with immediate effect. Mr Macpherson succeeds Sir Gus O'Donnell who, in turn, is to succeed Sir Andrew Turnbull as Secretary of the Cabinet and Head of the Home Civil Service.
Welcoming the appointment Chancellor Gordon Brown said: "I am delighted to welcome as the new Permanent Secretary Nicholas Macpherson, who has been an outstanding Managing Director. Nick brings with him a wealth of experience having run two of the Treasury's most important policy Directorates and headed the office of two Chancellors. I look forward to continuing to work closely with him."
Conservatives urge the government to regenerate industrial land
Shadow Secretary of state for Local Government Affairs and Communities, Caroline Spelman, urged the government to concentrate new housing development on regenerating derelict industrial land around inner cities rather than on greenbelt land.
Speaking on BBC Radio Four’s “Today” Programme, Ms Spellman commented: “If you just relax the greenbelt laws, it makes it very easy for developers to push out into greenfield and greenbelt, which is much easier and cheaper to build on, and incidentally where property prices on the whole tend to be higher because of the environment, and yet people then have to commute all the way across that swathe of derelict, unregenerated land back into the city centre. That is not sustainable.” (BBC Radio 4)
Housing market
Halifax report a slight rise in prices in July
Halifax reported that house prices edged up by a seasonally adjusted 0.2% in June, to stand 2.3% higher than a year earlier. Prices have been virtually unchanged since the start of the year. Chief Economist Martin Ellis noted an improvement in affordability: “Yesterday's 25 basis points cut in interest rates will reduce mortgage payments as a proportion of gross income for the average new borrower from 20% to 19%, bringing it back in line with the average for the past 20 years and well below the 34% peak in 1990." (www.hbosplc.com)
CML forecasts a flat housing market
The Council of Mortgage Lenders released a new set of forecasts and predicted a flat housing market over the next few years. The previous forecast, for house prices to rise by 4% over 2005, was scaled back to a fall of 2% over the year, although the CML note: “We do not foresee this as a precursor to a period of substantial or sustained house price falls.” Prices are forecast to be unchanged in 2006 and to rise by 2% in 2007.
The level of transactions is forecast to drop away in 2005 from the very high levels seen in 2004, with the CML expecting “that activity will steady in 2006 and 2007 at around 1.3 million (transactions per year), close to the level typical of the 1990s. (www.cml.org.uk)
CEBR forecasts average annual house price growth of 3.95% over the next 20 years
The Centre for Economic and Business Research assessment for the UK housing market, “Housing Futures 2005”, saw them predict that the average house price will be £335,674 in 2025, compared to 163,334 in 2005. The CEBR marginally revised down average annual inflation from 4.15% to 3.95% for the next 20 years, citing a lower forecast for immigration and an appreciation of the financial pressure on young adults from student loans. The CEBR expect a slightly higher rate of housebuilding than previously forecast (204,00 per year against 199,00 in their previous forecast), but “remain sceptical about the Office of the Deputy Prime’s attempts to ease the planning process for house building.” (www.cebr.com)
Company News
Upbeat trading statement for Bellway
Bellway confirmed that it expects its year-end results to align with market expectations in its half yearly trading statement. The firm reported completions 6% ahead of last year, at 7,001 homes - a record for the company, which has grown its volumes every year for the past 14. The average selling price achieved was around £165,000, compared to £161,400 in 2004.
While the group’s order book stands at £513 million, compared to last year’s £587 million, the statement struck a positive note, stating: “Our performance has been achieved against the backdrop of a less robust market place.” Year-end operating margins are expected to come in at around 19.5%. Bellway corporate affairs manager Julian Kenyon said: “Our trading statement is certainly more upbeat than some others that have gone before it recently.” (www.bellway.co.uk)
Other News
New powers for LPAs to speed up the planning system
ODPM Minister Phil Woolas announced new powers for Local Planning Authorities aimed at making developers deliver on planning permissions and speeding up the planning system. The reforms will mean:
Local Authorities will have greater powers to decline to determine repeat planning applications from developers trying to wear-down resistance to inappropriate development;
Most planning permissions will be granted for three years, instead of the current five, except where the local authority agrees to a longer period;
Statutory consultees will have to respond to requests for advice within 21 days to help speed-up planning decisions;
Concurrent inquiry sessions may be held at inquiries into applications for major infrastructure development called-in by the Secretary of State to reduce inquiry time. (www.odpm.gov.uk)
Survey of English Housing
The ODPM published Part 2 of their Housing in England 2003/4 Survey: Owner Occupiers and Second Homes. It revealed that there are an estimated 14.5 million homeowners in England, 71% of all households. 59% of these were buying their home with a mortgage while the rest owned their homes outright. The proportion of interest-only mortgages had fallen from 67% in 1993/4 to 31% in 2003/4, with the remainder having repayment mortgages.
Interestingly, reflecting the relatively high house price levels of recent years, more than half of the country’s outstanding mortgage debt is accounted for by mortgages that started in 2001 or later.
An estimated 298,000 households had a second home in England in 2003/4, with the South West accounting for 27% of these, a 16% increase on a year earlier. The number of households with a second home overseas rose by 15% over the year to 178,000, with 35% of these in Spain and 24% in France. (www.odpm.gov.uk)
HBF question IPPR conclusions
HBF Chief Executive Rob Ashmead wrote the following letter to the Financial Times in response to the findings of an Institute for Public Policy Research report.
Sir, The Institute for Public Policy Research, by putting forward its own modelling, questions the assumptions of Kate Barker's report that house price inflation can be influenced by increasing supply (July 28).
Whatever the merits of competing methodologies, the fact remains there has been a 30-year trend of falling supply at a time of significantly increasing demand. People need homes to live in. Failing to address the problem will only exacerbate the serious economic and social consequences that undersupply is already having on our communities. Increasing supply is not an immediate panacea to ease affordability but is vital to ensure a better long-term equilibrium with demand that will help bring stability to prices. (Financial Times)
Greenbelt anniversary highlights conflict over policy
The Campaign to Protect Rural England (CPRE) has celebrated the 50th anniversary of the greenbelt policy with the publication of a MORI poll showing that 84% of people are against building on protected land. The CPRE’s head of planning Henry Oliver said the greenbelt was under threat “as never before” because of the government’s plans for housing growth. But HBF chief executive Rob Ashmead stressed the government's careful planning for greenbelt protection and its impact on the ability of the housebuilding industry to meet demand.
He said: “We should recognise that one consequence of the greenbelt policy is that many British people live at higher densities than our European counterparts. Only 8% of land in Britain is urban, half that of Denmark, Belgium or the Netherlands."
He added: “Most people are not opposed to the sensible development of the greenbelt. An HBF YouGov Poll in 2004 showed that 65% of people agree that new homes should be built on greenfield sites if they are needed locally, no brownfield sites are available, and care is taken to preserve the environment as far as possible. Increased housebuilding is not about concreting over the countryside. Even Kate Barker’s most ambitious scenario of 120,000 additional homes each year would use only 0.75% of total land area in the south east over the next ten years." (www.hbf.co.uk)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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