A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Interest rates left unchanged
As had been unanimously anticipated by market commentators, the Monetary Policy Committee (MPC) of the Bank of England left the repo rate unchanged at 4.50%, the second consecutive month where rates have been left on hold, after a 25 basis point cut in August.
(http://www.bankofengland.co.uk)
Mortgage equity withdrawal increased in the second quarter
The Bank of England reported a rebound in the level of mortgage equity withdrawal (MEW) in the second quarter, the first increase after five consecutive quarterly falls. The Bank’s estimate of MEW is intended to measure the part of secured borrowing that is not invested in the housing market. MEW totalled £8.7bn in the second quarter, up from £6.4bn in the first quarter, which equates to 4.2% of post-tax income, a measure that has fallen from as high as 9.0% of post-tax income in the fourth quarter of 2003.
(http://www.bankofengland.co.uk)
Political Events
Conservative Party conference
The Conservative Party conference saw some significant comments relevant to the industry:
Shadow Local Government Minister Caroline Spelman criticised the government’s house building programme in her speech to the Party, saying: “The sad reality is that places we know, and love, and choose to live are being changed forever, and all because this government has bought the idea that a massive house building programme will sort the crisis in the housing market. To say the whole scheme is crude would be unduly flattering. Of course we need to create more homes, particularly affordable ones, but Mr Prescott you cannot be serious that a soviet style central building plan is the best way of delivering this? What if there is a crash in house prices? Will we then see the compulsory purchase and demolition of properties in a bid to drive prices back up?”
Ms Spelman also criticised the government for concentrating “on concreting over the south” and ignoring the bigger picture. She also said: “As we slide down the ranks of economic competitiveness, Blair's claims of uninterrupted growth ring hollow, and especially hollow to people in areas not fashionable enough to interest New Labour. In many city centres it may be boom time with new apartment blocks and bistros, but beyond that lies a collar of decline characterised by run down housing and a growing culture of under-achievement.”
At a fringe meeting Owen Paterson, MP for North Shropshire, criticised the centralised nature of the government’s housing policy. Mr Paterson conceded that extra housing, in particular affordable housing, was needed as large numbers were moving to the countryside, but argued that there needed to be more local accountability in the planning system. He also argued for more imaginative use of redundant agricultural sites and an increase in shared equity schemes. Mr Paterson also suggested that housing needs could be decided at a county level.
Helen Williams, Head of Neighbourhoods and Sustainability at the National Housing Federation, said that since at least 50,000 new homes were needed in the countryside, “We cannot afford not to act.”
Telegraph claims that VAT regime may be changed
An article by Charles Clover, Environment Editor of The Daily Telegraph, claimed that Ministers are considering reducing VAT on home improvement and imposing it on new homes. It was reported that John Prescott has long regarded it as an undesirable distortion of the market the developers modernising properties have to pay 17.5% VAT, while there is no VAT on new homes. (Telegraph)
Residential Property, Money Laundering and Proceeds of Crime
The Asset Recovery Agency yesterday conducted a number of searches in the Manchester area in connection with a property portfolio that has been acquired over a period of time which is believed to be worth in the region of £30 million. The Agency has so far identified approximately 250 properties. The Agency, created under the Proceeds of Crime Act 2002, has powers to seek civil recovery of the proceeds of unlawful activity by an action in the High Court. Among its aims is the prevention of criminals and their associates from laundering the proceeds of criminal conduct.
Guidance on the Money Laundering Regulations, and whether they apply to house builders, is available on the membership section of the HBF web site (www.hbf.co.uk) under Industry Issues, Government and Parliamentary.
Company News
Housebuilders chosen for £500 million Telford redevelopment
George Wimpey, Persimmon and Barratt have been chosen by English Partnerships to lead a £500 million regeneration project, involving the creation of a new community in Lawley, Telford. The three had made a joint bid for the project, which will involve the construction of 3,300 homes on the 70 hectare brownfield site, along with offices, restaurants, bars, a primary school, parkland and shops.
“The winning developers are some of the country’s most successful housebuilders," said EP chairman Margaret Ford. "They have shown that they have the vision and ambition to make sure this project reaches its full potential. Lawley will be one of Britain’s most significant and exciting urban developments. It will set national standards on how a large sustainable community can be designed, created and integrated with an existing town. The new community will account for about a fifth of the new homes that Telford needs over the next decade, with a quarter of the planned homes being affordable, split between shared-ownership and social rented.” Work is due to start on site in mid-2006.
(http://www.englishpartnerships.co.uk)
Developers chosen for brownfield pilot scheme
Bellway, Countryside, George Wimpey, Crest Nicholson and Urban Splash are among 22 developers who have been chosen by English Partnerships to take part in a pilot programme aimed at bringing brownfield sites back into use. The programme, which is a joint ODPM-EP initiative being run across 14 local authorities in England, is part of the government’s National Brownfield Strategy, aimed at re-using 64,000ha (158,000acres) of brownfield land.
Professor Paul Syms, EP’s national brownfield strategy director, said: “We have had an excellent response from developers who have shown a strong commitment to being part of this programme. These developers will now play a major role in helping local authorities and local people transform some of the country’s worst eyesores. We expect the pilot programme to provide a focus for the long-term effective re-use of the country’s brownfield ‘legacy’.”
(http://www.englishpartnerships.co.uk/)
Gleeson report rising profits
MJ Gleeson Group has reported a 57% advance in profit before interest and tax, for the year to 30 June compared to the same period twelve months earlier, to £43.7 million on turnover up 25% to £419 million. The group’s homes and regeneration business saw turnover rise 43% to £160 million and operating profit increase by 39% to a record 17 million. The discontinued building operations recorded an operation loss of £44 million on turnover of £171 million.
Chairman Dermot Gleeson said: “Withdrawal from general building contracting has substantially reduced the group’s risk profile. The task is now to develop to the full the profit generating potential of the group’s continuing operations.”
(http://www.mjgleeson.com)
Housing Market
House prices rise for second consecutive month, according to Halifax
Halifax reported that house prices rose by a seasonally adjusted 1.2% in September, on the back of a 1.9% rise in August. Prices stand 3.0% higher for the three months to September compared to the same period a year earlier. Chief Economist Martin Ellis commented: “Healthy household income growth and historically high levels of employment are supporting the housing market and the Bank of England's decision to cut interest rates in August also appears to have given the market a boost. Nonetheless, the reduction in economic growth this year and the continuing high level of house prices in relation to average earnings are expected to constrain housing demand and prevent a sustained surge in house prices."
(http://www.hbosplc.com)
Hometrack report a further fall in prices
Website Hometrack reported that house prices fell by 0.1% in September, the fifteenth consecutive monthly fall, taking prices 3.7% lower over the last twelve months. However, Hometrack did note a 5.5% increase in activity over the month and believe that this is a reason that “suggests that buyer confidence is improving.” Housing Economist John Wriglesworth is fairly upbeat on the prospects for the market next year, commenting: “Hometrack believes the present trend of house price falls will end before the end of this year. While house price falls are on track to meet our -5% forecast for the year, we expect a reasonably strong rebound for 2006. While another boom in house prices is not in prospect, a house price crash can clearly be ruled out.”
(http://www.hometrack.co.uk)
Other News
ODPM figures show a rise in planning applications granted, but the number of refusals hits a record high
The Office of the Deputy Prime Minister’s (ODPM) second quarter planning statistics show that the number of applications granted rose and the speed with which decisions are made hit a record level, with 16% decided within 8 weeks and 62% within 13 weeks. However, the figures also reveal that the proportion of applications being refused permission, the refusal rate, also hit a record high of 36%. So while the number of successful applications has risen, the number of refusals has risen at a considerably faster pace.
The ODPM target for 13 week decisions is 60%. The target is for "decisions", regardless of whether they are permissions or refusals.
(http://www.odpm.gov.uk)
Housing Corporation working to reduce cost of regulation
A report commissioned by the Housing Corporation exploring the costs to housing associations of compliance with its regulations has concluded that regulation in fact has a positive net benefit on the sector – estimated at £175 million over a five year period.
The report, Exploring the Costs and Benefits of Regulatory Compliance, was commissioned by the Corporation as part of its drive to improve its regulatory methods. It provides an initial indication of the costs of complying with various elements of regulation, as well as a cost model, which the Corporation now aims to use for further research. Bob Dinwiddy, assistant chief executive – regulation, said: “The results of this study will feed into our work to review the burden of regulation and help us to implement our more rigorous risk-based approach to regulation.”
The HBF is also conducting its own research into the growing cost burden of regulatory compliance, particularly with regard to Building Regulation changes over the past five years.
(http://www.housingcorp.gov.uk)
CPRE launch Housing Manifesto
The Campaign to Protect Rural England (CPRE) launched its own two page Housing Manifesto, opposing efforts to make the planning system more flexible and responsive to the market. The CPRE wants to see “at least 75%” of new homes built on brownfield sites by 2008 and density targets to be raised to 50 dwellings per hectare. The CPRE claim that “Medium densities, well above 30 units per hectare, still allow families to have gardens, parking and roomy homes.”
(http://www.cpre.org.uk)
Councils ignoring flood warnings says Environment Agency
The Environment Agency has warned that thousands of lives and homes are being put at risk because councils are allowing properties to be built in areas that are at serious risk of flooding. In Britain at least five million people in two million homes are at risk of flood. The agency’s chief executive Lady Young estimates that in 40% of cases local councils are ignoring Whitehall guidance and not consulting the agency before they give planning permission. “What surprises me is that having consulted the flood risk experts at the agency, local authorities are prepared to put people’s property and lives at risk by allowing development in the flood plain,” she said.
The agency wants ministers to make it a legal obligation for councils to complete a risk assessment for every development in the flood plain. Lady Young said it was possible to mitigate many problems by building flood defences or diverting flood water. (Guardian)
Affordable Rural Housing Commission calls for evidence
The Affordable Rural Housing Commission (ARHC) has called for evidence to gather the views of those with knowledge and experience on the issue of affordable rural housing. ARHC Chairwoman, Elinor Goodman, said:
"The Commission is seeking evidence and views from people with real experience relating to the issue of affordable rural housing. We want to hear about the key factors affecting provision, to learn of examples where innovative thinking or good practice has resulted in delivery and also receive suggestions of how things could change or be done better.” The ARHC call for evidence will run from today until the 14 November and intends to focus on those involved in the issue of affordable housing in rural areas, including local authorities, Housing Associations, environmental groups, and the private sector.
(http://www.defra.gov.uk)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
For daily news updates for the housebuilding industry from Housebuilder magazine go to www.house-builder.co.uk