A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, the HBF's head of media. Available to members only.
Prescott plans FTB homes for £60,000
Accusing housebuilders of riding a “gravy-train” that has to be stopped, John Prescott’s latest plan is to build cut-price homes available to first time buyers for £60,000. Under the scheme, which will be a pledge in next year’s general election manifesto, the homes would be put up on public land. Buyers would only pay for the costs of construction, but not the land, which would stay in public ownership. Prescott claimed the scheme, which would initially be piloted in the South East, would slash the cost of buying a two or even three-bedroom home to less than £60,000. Housing minister Keith Hill accepted there were a number of potential problems with the scheme, including a lack of clarity of what would happen when the original buyer came to sell the property. However, he said that if Britain’s 10 largest housebuilders refused to entertain the idea, government would look to foreign companies. (FT, Guardian)
Industry: you know who to blame
Housebuilders believe they have been made scapegoats for the government’s own inability to sort out the planning system that has created Britain’s housing crisis. Evidence showing how planning delays have worsened is proof enough that ministers’ plans for a faster, fairer, planning system have failed. And the extra build costs criticised by Prescott can be laid squarely at planning policy and building regulations changes. Ed Hinchcliffe, commercial director of Taylor Woodrow, said that of the 60 percent rise in build costs, 24 percent of this can be attributed to extra building regulations, whilst the remainder is mainly down to wage inflation - also fuelled by government. This echoed HBF views in last week’s papers. Persimmon CEO John White renewed calls for industry to be incentivised by government to invest further in MMC, whilst Wilson Bowden CEO Ian Robertson said the constant changing of priorities, target-setting and “initiatives” laid down by government was making industry’s problems worse. The Rics later branded the idea of £60,000 homes as “pie in the sky” and Country & Metropolitan CEO Stephen Wicks also said the idea was a “nonsense”. (FT, Times, Telegraph)
IMF renews price plunge warning
The International Monetary Fund has issued another warning of a sharp fall in house prices. Telling house-hunters to “exercise particular caution”, it said “around 40 percent of house price booms are followed by a crash”. It also warned the chancellor to cut spending or raise taxes and urged the Bank of England to raise interest rates to head off inflation. It added: “While inflation remains low, the economy is now running at close to capacity and cost pressures are increasing. The Bank has appropriately raised rates five times since November 2003 and a continued ‘early but gradual’ approach appears desirable.” But the Bank of England’s Kate Barker was less convinced of the need for a rate rise: Of the more recent data on market conditions, she said: “It is likely this is a turn in the market. However much pent-up demand you have, if people think that prices are going to decline then they may decide to stay out of the market.” (All media)
HBF Note: Maybe if the IMF and others continue with their prophesies, they will become self-fulfilling. They can then say: “We were right all along!”
Mortgage deals plummet…
Mortgage approvals for home purchases suffered a sharp fall for the second consecutive month in August. The BBA said 64,000 new loans were agreed for the month, the lowest figure since January and 22 percent below August 2003’s level. The average loan value also fell to £112,100, from a high of £116,500 in June. The figures have been interpreted in different ways by analysts - some saying the market slowdown is becoming more marked whilst others insist they show a slowdown, not a slump. (All media)
…while prices creep lower
The latest Hometrack survey indicates a 0.3 percent fall in average prices for England and Wales during September. The company has now revised forecast growth for the year down from five to three percent. Agreed sales also fell in September while the average time to sell rose to 5.8 weeks in July. Meanwhile, Ernst & Young has published a report forecasting a “steady deceleration and a rebalancing of house prices relative to incomes”. It also warned of a “vigorous correction” in the buy-to-let market, particularly in the South East. However, the Nationwide’s latest figures for September suggest prices rose by 0.2 percent in September - faster than August’s 0.1 percent rise - and have helped allay, to some extent, fears of a crash. (All media)
Trading up getting tougher
Climbing the property ladder is at its toughest for 10 years, says the Nationwide. The price differential between different home sizes has been widening rapidly. To demonstrate, the price gap between a West Midlands semi and a detached house has widened from around £40,000 in 1999 to £70,000 today. The picture is similar across the whole country and equally applicable to gaps between flats and terraced houses, terraces and semis. This finding comes despite the fact that in percentage terms the prices of smaller homes are growing faster than larger ones. (Times)
Supermarkets move into housebuilding
Supermarkets are planning a substantial move into housebuilding. Asda and Sainsbury both plan to build around 1,600 homes over the next three years while Tesco plans to build more than 1,000 next year. The supermarkets are responding to council demands for affordable housing in exchange for planning consents for stores, mostly in London, but spreading across the country. FPDSavills, said: “It’s happening everywhere. Virtually no new supermarket planned for a free-standing site in London can be built without housing on top.” (Times)
Mortgage bills jump 46 percent
The monthly mortgage interest bill has jumped 46 percent over the past year, the fastest one-year rise since 1988-9. The increase is due to the combination of higher base rates - which account for an increase of 35.7 percent between November last year and August of this year - and, until recently, house price growth that accounted for the remaining 16.4 percent. (The Business)
Travellers immune from planning laws
Travellers who set up homes in defiance of planning laws must be allowed to stay the Court of Appeal has ruled. Based on European human rights rules, the judgement could make illegal settlements across the country virtually untouchable. The case considered three traveller families who bought land near Chichester, Sussex, three years ago, and nothing in the ruling appears to prevent them building permanent settlements on their land. The judgement gives travellers the right to set up homes as long as local councils have not provided official sites for them, something the deputy prime minister is urging, and failing, councils to do. (Mail)
HBF Note: Time to set up as “Travelling housebuilders Ltd”.