A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, HBF's head of media, available to members only.
Bank raises rates to 4.5 percent
As expected, the Bank of England raised interest rates by 0.25 percent for the second consecutive month in an attempt to rein in the housing market and consumer spending. For now, house price rises show no sign of abating - according to lenders’ indices - and recent business figures show the economy is growing more strongly than anticipated, with manufacturing at its strongest since August 2002 and retail sales growing more strongly than at any time since May 2002. All this suggests today’s rise might be followed up with a continuing series of quarter-point rises until the cost of borrowing starts to bite. (BBC)
HBF note: Industry has generally backed the call for continuing but steady interest rate rises to bring spending and house price rises under control and to avoid the danger of a crash. This follows a similar call by Barratt CEO David Pretty, last week.
Government plans to scrap LA designation of protected land
The government is to scrap landscape designation policy by local authorities. Until now, councils have been able to arbitrarily classify sites as protected from development under various guises. But this is to be scrapped following the Countryside Agency’s mapping of the whole country in terms of landscape quality, and protected status will be determined at national level. HBF hailed this as a significant step in the fight against nimbyism and said that both the interests of increased housing supply and protection of the environment were best served by considering the nation as a whole. CPRE said it was a blow for local democracy. (BBC R4)
Homes shortage nearing “half-million”
The continuing shortfall in housebuilding means Britain is close to being 500,000 homes short of need according to the Halifax. The bank said prices rose 2.2 percent in May and that undersupply would underpin strong house price growth for 15 years while an increasing number of younger people would be forced to continue living with their parents or sharing with friends as the shortage worsened. Halifax now puts the average price at £157,849 - almost 20.4 percent higher than at the same time last year. (Telegraph)
HBF note: The level of speculation about the state and prognosis of the market seems to have reached a new pitch as the contrast between the Halifax’s statement above and the following articles reveal.
House prices could stagnate for years
The idea that prices might not crash, but simply stagnate, appears to be gaining popularity in the media. The first evidence suggesting a slowdown has emerged from estate agents, with the chief executive of the Skipton building society - which owns the Connells chain of agencies - saying: “Over the past few weeks the number of property transactions has dropped by about 10 percent, having been steady for the past nine months. I don’t think this is an aberration - it’s the start of a trend whereby the market will cool down."
The estate agency website, Rightmove, agreed. “We think this is the start of the slowdown that everyone has been expecting. Houses are simply unaffordable for many buyers and interest rates are starting to rise.” Meanwhile the Nationwide and FPDSavills are hinting that the market could see zero growth for almost a decade as earnings start their slow climb to catch up with prices. (Sunday Times)
Will buy-to-let investors buckle?
The fear is that this peak of the market - if it has in fact arrived - might prompt buy-to-let investors to offload, which might prompt a crash. So far, most seem to be holding their nerve, fulfilling the view of lenders that most investors are opting for long-term investment. However, with the average landlord in four of London’s 34 boroughs operating at a loss since December, margins are tight and some amateurs, unable to nurse even a small deficit, might be forced to sell. The experts are renewing their advice that buy-to-let is for the long-term but investment bank Durlacher believes investors will not hold their nerve and could prompt a crash of 30 percent. (Sunday Times)
Village schools threatened by second homes boom
Village schools across the country are struggling to fill places because so many local homes have been bought as holiday homes by outsiders. Dorset and Devon are particularly hard hit and the problem is spreading nationwide as younger locals are priced out. (Telegraph, Mail, Times)
HBF note: There must be an unmentioned link between this and low levels of rural housebuilding. The overall housing shortage provides the investment incentive for investors to buy housing. But perhaps the willingness to invest in detached and rural homes is even stronger given that supply constraints for these are even tighter thanks to planning policy. Meanwhile, rural councils are continuing to produce ever more inventive - but failing - policies to keep outsiders out.
Country & Met halts South East house building
Country & Metropolitan has stopped building luxury homes in the South East and is to focus on building affordable homes in the £100,000 to £300,000 bracket. The move comes soon after Countryside warned it was having difficulty selling homes of £400,000 or more in the South East. C&M chief executive Stephen Wicks said: “With demand for quality affordable housing in the UK still outstripping supply, the initiatives announced today place C&M as a major provider of affordable homes. (Times, Telegraph)
Big increase in storm and flood claims
Claims for storm and flood damage has doubled in value since 1998 according to a report for the Association of British Insurers. The report also expects weather risks will increase by between 2 to 4 percent a year as summers become hotter and drier, and winters milder and wetter. The change is being blamed squarely on global warming and the reactionary approach to this threat will have to be improved with proactive measures. (FT)