A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, the HBF's head of media. Available to members only.
Bank raises rates a further quarter-point
As expected, the Bank of England’s monetary policy committee has raised interest rates a further 0.25 percent to 4.75 percent. Opinion is split as to whether, and by how much, rates will continue to rise. Economic growth is stronger than expected, but despite some claims to the contrary (see below), there are clear signs that the housing market is slowing down. General consensus is that a further quarter-point rise can be expected before the end of the year - probably in November. (All media)
HBF Note: The Times commenting on the difficult balancing act facing the MPC, says: “The MPC is not charged with controlling house prices directly but it is clearly concerned. Yet although interest rates have a useful role to play in easing the position, the far more critical factor affecting house prices is supply. It is only when the planning permission regime is reformed to allow more house building that the UK economy can hope to be free of the housing bugbear.”
Housebuilders and estate agents - vs - banks and building societies
Housebuilders are delivering ever-more strident warnings to the Bank of England that recent interest rates have done their job of cooling the property market and that lenders indices are way off the mark. Led by Taylor Woodrow’s CEO Iain Napier and finance director Peter Johnson, the industry has told the Bank that the “medicine is working”. Johnson added: “I’d hope the monetary policy committee has a more sophisticated understanding of the market that taking Halifax and Nationwide (surveys) at face value.” These calls were backed up by leading estate agents who see eye-to-eye with housebuilders and branded Nationwide’s claim of a 2.1 percent rise in prices last month “irresponsible”.
Housebuilders broadly claim that real house price inflation is running at a little over half the 20 percent(ish) rate suggested by lenders and say the failure of the lenders to take into account the £9 billion annual spend on improvement to existing stock is largely to blame. However, Nationwide’s group economist Alex Bannister is unbending and said it was not surprising that developers selling detached homes in the South East were not seeing double-digit inflation. He said: “Their not comparing apples with apples. You can’t ascertain property prices by going to the pub.” (!) (Independent, Guardian)
HBF Note: Mr Bannister’s claim that housebuilders are still focused on detached houses in the South East does the veracity of his inflation claims little credit. Perhaps a reminder of the following facts might help: In 1997, 47 percent of new homes built in the South East were detached whilst the proportion of flats was 14 percent. By 2003, this was almost totally reversed, with just 19 percent detached and 46 percent flats. For the whole of England: 44 percent detached and 15 percent flats in 1997; 26 percent detached, 38 percent flats in 2003.
Prices up says Halifax. Prices down says Rightmove
Bang on cue, the Halifax claims average prices rose 1.3 percent in July, marginally up on June’s 1.2 percent and producing a total 22.1 percent increase on the year. Rightmove, the estate agency index said otherwise, claiming prices fell by 0.5 percent in the last three weeks of July. Halifax tempered their upwards figures by suggesting this was evidence that the market was cooling down and that future figures would confirm this downward trend. (All media)
Taywood and George Wimpey to concentrate on US…
With planning getting no easier and house prices slowing, Taylor Woodrow and George Wimpey are increasingly turning to the US to keep growth and margins buoyant. Taywood CEO Iain Napier said: “The UK is difficult but in the US we can grow our volumes because we don’t have the planning constraints.” George Wimpey CEO Peter Johnson agreed, saying his company would be selective in its UK operations. “The US is a great opportunity to invest to grow. Planning in the UK is getting more difficult.” (Telegraph)
…but Barratt opts for UK
Barratt has chosen the opposite route to George Wimpey and Taylor Woodrow by putting up its £91 million US operation for sale. Barratt CEO David Pretty explained why: “We can make significantly better returns in the UK and are selling out in a strong market. If anything, the planning system is getting worse but we’ve done better than most in securing approvals. We’ve been in urban renewal and brownfield for a long time and that gives us more opportunities as they are less difficult to get planning consents on.” The proceeds of the US sale will be spent on “selective purchases” of land but acquisitions are not ruled out. (All media)
Taywood’s 31 percent profits rise
Taylor Woodrow has announced a 31 percent rise in interim profits but expects a calmer future. CEO Iain Napier still expects sales volumes of 10,000 for the year but said further growth was unlikely due to planning system constraints “The market has slowed to relatively normal levels but we are still selling 0.6 homes per site per week, down from 0.7 per week last year. It’s not a crisis.” Average selling prices rose six percent to £199,100 with overall pre-tax profits up from £128.3m to £168.7m. (FT)
240,000 mortgage holders already struggling with debt
Almost a quarter of a million mortgage-holders are struggling with debt despite moderate interest rates, says the Nationwide. The building society said these borrowers were “regularly having difficulties” following the four quarter-point rises since November. Nevertheless, all is well as 95 percent of homeowners “usually have enough money to pay their mortgage each month”, said Alex Bannister. (Telegraph)
HBF Note: The silly season certainly has arrived. This story is meaningless.
Government relents on country house ban
The government’s proposed ban on the building of large country homes has been scrapped - as long as they are at the cutting edge of contemporary design and demonstrate “exceptional quality”. Neo-Georgian “footballers-wives’ style monstrosities” will not be acceptable. Planning minister Keith Hill also made it clear that schemes that encourage experimental building and use modern methods of construction will be viewed favourably. Riba is delighted and its president, George Ferguson, welcomed the government’s “brave and vital endorsement of the value of excellence in design”.
HBF Note: This decision not to scrap but re-define “Gummer’s Law” might be seen as a good thing. But it also demonstrates once again government’s seemingly endless desire to interfere and proclaim itself arbiter of “taste” and design. This is a worrying trend.
HBF attacks Liverpool’s housing moratorium
Liverpool Council has become the latest in the North West to join in a moratorium of new housing development. The HBF’s Pierre Williams said the council’s decision to limit new planning permissions to the areas pathfinders was a deliberate distortion of planning guidance that would damage the area’s economic growth and prospects. “It makes sense that pathfinder areas are regenerated but this is meant to be over and above normal housebuilding elsewhere, not instead of it.” Frank Reil, managing director of David McLean Homes, said: “This is strangling us and is stopping people living in places where they want to live. Not everyone wants to live in a pathfinder area. People should be able to choose.” (Liverpool Echo, BBC, trade press)
Taxman homes in on building site dodge
The Chancellor is set to crackdown on bogus self-employment in construction. The Inland Revenue, will warn thousands of contractors next week not to classify workers as self-employed if they are effectively on their payroll full-time. The Revenue says that if a self-employed person carries out the work, is told when and how to do it, works a set amount of hours and can receive overtime payments, he or she should probably be an employee. (FT, Times)
Poundbury residents criticise high density
Proposals to extend Prince Charles’ model village, Poundbury, have come under fire from existing residents. The proposals aim to cram in 122 dwellings her hectare - a figure residents have branded “ridiculous and not in keeping with the area” and which councillors have called “overpowering”. The condemnation of such high density is likely to prove an embarrassment for the Prince, given his efforts to impress on John Prescott how Poundbury should be a model for the Government’s housebuilding plans. (Observer)