A weekly news summary by Pierre Williams, HBF head of media, covering all aspects of the housebuilding industry. Available to members only.
Halifax: prices drop 1.1%
The Halifax says house prices fell an average 1.1% in October - an acceleration of the downward trend in prices over the past three months. The bank said the series of five quarter-point interest rate rises had raised mortgage payments as a percentage of earnings for new borrowers from 14% to 19% over the past year. However this remains well below the peak of 34% reached in 1990. Despite the increasing evidence of the slowdown, the Nationwide is still relatively optimistic for the future, insisting that the fundamentals remain sound. Interest rates may well have peaked, employment and incomes are growing, and undersupply will also help underpin the market, it said. (All media)
Mortgage approvals slump
The number of mortgage approvals has fallen to its lowest level since August 2000 with just 89,000 loans approved in September compared to 95,000 in August. These Bank of England figures confirm the housing market slowdown. Meanwhile, Prof David Miles, author of the Treasury-commissioned report into long-term fixed-rate mortgages, increasingly believes that prices could fall 20 - 25% if the growing view that housing is overvalued continues to erode buyer confidence. (All media)
Lords threatened social housebuilding by private sector
John Prescott’s idea to allow private housebuilders to build affordable homes came close to collapse this week. An amendment to the Housing Bill was this week tabled by Joseph Rowntree Foundation boss Lord Best, after he claimed that housebuilders would keep almost all the profits from affordable homes once they were sold. Best, backed by the National Housing Federation, said the private sector would cherry-pick the most lucrative developments, leaving the housing associations to deal with the more difficult sites. However, the government defeated the amendment after promising Lords that the private sector would be bound by similar rules to housing associations. Government appears determined to open up some of the £1.6bn social housing grant to housebuilders and says it is “fully aware of the risks and how to deal with them.” (Observer, trade press)
Election knocks REITs off track
The Chancellor’s plans to introduce property investment trusts may be delayed until after the next general election - a wait that could hit property company shares, the industry has warned. BPF CEO Liz Peace, said: “We have a fantastic opportunity to make ourselves the centre of a European REIT (real estate investment trust) industry. Unfortunately, I think we are going to be screwed by a general election.” One study estimated that six million British investors would be willing to put £35bn into real estate if the low-risk, low-tax trusts were introduced and share prices of property companies have already risen in expectation of this - a move that might be reversed through delay or uncertainty. (Telegraph)
Labour to scrap legal aid for homeowners
The government is planning what will, in effect, be a further tax on home ownership by scrapping the right for homeowners to receive legal aid. Current rules grant legal aid to owners who have up to £100,000 equity in their homes. But the Legal Services Commission wants to scrap this in a move that would stop virtually all homeowners from getting legal aid. Shadow Home Secretary, David Davis, said: “The government has lost control on legal aid and now homeowners have to pay the price.” (Express)
Lords reject sellers packs
The House of Lords has thrown out government plans for the introduction of home sellers packs. But the government remains determined to make them mandatory from January 2007. A cross-party group of peers this week objected to the proposals for house sellers to pay £800-£1,000 for home information packs before properties could be put on the market. They said the proposals were not needed and would interfere with the functioning of the housing market. Lord Hunt echoed the overall view by saying: “It ain’t broke, so why are we trying to fix it?” But Housing Minister Keith Hill was undeterred by the Lords’ defeat and promised the packs would be introduced and be operative from January 2007. (All media)
New planning delays imminent
The government is allowing councils more time to produce their Local Development Frameworks (LDFs). Although the ODPM originally said all LDFs had to be in place by the end of 2006, local councils are now being told the timetable is more flexible than previously agreed. Some believe the delay was prompted by Planning Inspectorate claims that it would have an unmanageable workload if councils had attempted to stick to the original target which has planning grant attached to it. The Inspectorate has to rubberstamp some of the documents in the Frameworks via public inquiries and the thought is that it would be swamped with these documents a few months before the deadline. (EG)
HBF Note: Another fine example of joined-up thinking. The chances are councils will just see the longer timescale as a chance to put their feet up, in which case the deadline surge on the Inspectorate will not be any less - just later.
Service charge battle in High Court
A residential developer is seeking High Court backing for the service charge it levies on its tenants in a Canary Wharf block. Singapore-based Canary Riverside Developments, is seeking a declaration from the court that the Leasehold Valuation Tribunal has no jurisdiction to determine the fairness of the charges. It took action after residents went to the Tribunal to challenge charges that have spiralled over the past two years. In a separate but clearly linked issue, thousands of people who took advantage of right-to-buy in tower blocks are facing crippling bills for maintenance and repairs. It is thought up to 400,000 owners could be affected and pressure is being put on government to find a solution. (All media)
Rates Held
As widely expected the Bank of England’s Monetary Policy Committee yesterday decided to keep interest rates on hold at 4.75%. More worryingly, however, there was a rebound in High Street sales last month, suggesting consumers are not yet feeling the pain of higher debt servicing and putting more pressure on the MPC to increase rates in future if this continues. (All media)
Single females home alone
The number of single women buying their first home alone has soared. In 1983 just 9.8% of mortgages were taken out by single women. By last year this had spiralled to 23.1%. The National Audit Office figures show young women are increasingly taking the housing plunge alone. In England, 56% of men but just 37% of women aged 20-24 live with their parents. (Guardian)
Cabe attacked in Commons inquiry
A House of Commons inquiry about the “role and effectiveness” of the Government’s design watchdog, Cabe, has been told the organisation suffers from a “gross lack of accountability and transparency.” The accusation was made by the London Evening Standard’s property correspondent who added: “Cabe has a Trinny and Susannah approach - they’ll dress you and you’ll like it, whether it suits you or not.” Other witnesses also attacked Cabe’s accountability. Although Stanhope boss Sir Stuart Lipton resigned as head of Cabe earlier this year following media pressure, witnesses insisted “clique-ism” was still rife at the top of the organisation. However, most said Cabe had done a good job in promoting good design. (Trade press)