A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
HBF News
HBF convenes landmark summit to determine the most effective way to deliver the Government’s environmental vision
HBF’s summit roundtable on the proposed ten year target for building to zero carbon homes standards successfully brought together fifty senior figures from industry, Government and other interested stakeholders on Tuesday to discuss the issues raised by the target. The summit was jointly chaired by HBF Executive Chairman Stewart Baseley and Yvette Cooper MP, Minister of Housing and Planning and attracted much positive press and broadcast coverage. HBF were invited on to both Radio Five Live and the Radio Four Today Programme business news on Tuesday.
Stewart Baseley’s opening speech set out the summit’s objectives :
“The HBF has convened this roundtable summit for a simple reason: while the Government’s target cannot be delivered without the work of Britain’s home building companies, nor can the industry deliver without the support of the many other stakeholders who have an integral part to play.
This summit therefore aims to be the start of a process: to begin the task of identifying roles and responsibilities in partnership, utilising our collective expertise to help deliver results”.
“ we have three simple and clear objectives, the first of which I am delighted to say has already been achieved:
1) To bring together the key stakeholders needed to deliver the Government’s overall objective of building all new homes to zero carbon standards.
2) To identify the opportunities and potential barriers to delivering the
Government’s targets according to the timescale it has announced.
3) To identify appropriate mechanisms and tasks amongst the stakeholders present to advance issues critical to successful delivery”
View full speech
Responding to discussions around the table, Yvette Cooper welcomed the industry’s commitment to work towards zero-carbon homes:
“I strongly welcome the commitment of the Home Builders Federation to working with us to deliver the cuts in carbon emissions we need. But house builders cannot do this alone. Better standards of insulation won’t be enough on their own. We need to change the way we heat and power our homes. We need new partnerships between house builders, utility companies and local councils to deliver local energy and renewable energy to our homes as well. Whether it be turf or solar panels on the roof, wind turbines in the garden, heat pumps below the cellar, we need to develop the environmental technologies of the future. This is an opportunity for us to lead the way across the world. Our aim should be to develop the technologies we can apply to existing homes as well.
We have ten years to plan, invest and innovate to deliver zero carbon homes. It is vital that we invest now to bring down the costs of new technologies and deliver low cost, low carbon homes. The homes of the future must be affordable as well as sustainable”
View the full speech
The Summit demonstrated a shared recognition of the need to act, although it was felt that the definition of “zero carbon home” needed more thought. The ten year target was seen as challenging and discussion focused on the real practical and commercial issues to resolve to achieve it.
The chief practical and commercial issues identified were:
· A critical need for an industry-wide dataset on technology, design and performance issues for individual products and prototype new home designs.
· Important new considerations relating to energy supply. The proposed zero carbon standard would probably require the development of new forms of local low or zero carbon energy generation, distribution and trading.
· Suppliers needed a very clear roadmap of regulatory steps towards zero carbon at an early stage - ideally a detailed building regulations standard for 2016 and any interim steps should be developed now.
· A raft of consumer issues were also critical to success. It was felt that the value proposition of a zero carbon home was not clear to consumers at present. Much attention would need to be devoted to communicating clear and effective messages to overcome this factor.
· All of the above issues entailed skills and knowledge requirements for all parties. Skills capacity and confidence in the application of skills in practice would be important in delivering success.
· There were a range of fiscal, policy and regulatory issues for government. These ranged from the forward plan for building regulations, through the role of national and local planning policy to energy policy and regulation and the need for possible research funding and further fiscal incentives.
We are discussing follow up with DCLG officials, including ways in which we can co-ordinate the pursuit of the main issues summarised above.
Economic News
Bank rate rise
The Monetary Policy Committee (MPC) raised bank rate by 0.25 percentage points to 5.25% on 11 January, the third quarter point rise since August 2006. Bank rate is now at its highest level since late 2001 and compares with the trough of 3.50% between July and November 2003. Interest rate futures point to a further quarter point rise, to 5.50%, during the first half of the year.
Although a rate rise was widely anticipated in February, the January increase took almost everyone by surprise. The Bank of England’s statement highlighted two particular concerns.
It said UK output continues to rise at a firm pace, adding that “the margin of spare capacity in the economy appears limited, adding to domestic pricing pressures”.
In addition, the MPC is especially concerned that the recent surge in inflation will feed through into pay demands, further adding to inflationary pressures. CPI inflation accelerated to 2.7% in November and headline RPI inflation, the measure most likely to influence pay demands, hit 3.9%.
December inflation figures, which the Bank sees in advance, are due out on 16 January. Some commentators have suggested the pre-emptive January rate increase means the December inflation figures are likely to show a sharp rise, possibly to the 3% top end of the Bank’s target range
NAEA consider rate rise premature
The rise in interest rates has been met with by surprise from the National Association of Estate Agents (NAEA), which believes that not enough time has been given for the effect of the November rate rise to be fully felt.
Peter Bolton King, Chief Executive of the NAEA says: "The full effect of the rate rise in November is yet to be felt in the residential housing market. This shock decision from the Bank of England is clearly premature and extremely disappointing. Whilst the early indications for 2007 are that the housing market is performing well, the vast regional differences remain a concern. The market in London and the South East of England continues to thrive, however segments of the market are much steadier in other areas of the country”.
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Halifax show 1% drop in December prices, but 10% rise for 2006
Figures from the Halifax have shown that despite a 1% fall in house prices in December 2006, the overall figure for price inflation in 2006 was 10%
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Governement News
Planning-gain Supplement (Preparations) Bill published
The Treasury has published legislation which will allow the Government to meet the costs of business processes needed to underpin the introduction of the proposed Planning-gain Supplement (PGS).
The Planning-gain Supplement (Preparations) Bill, which has had its first reading in the Commons, will allow for initial expenditure estimated at more than £50m for information technology and administrative systems.
The spend will involve Her Majesty's Revenue and Customs (HMRC), the Planning Portal (via Communities and Local Government) and the Department of Personnel and Finance in Northern Ireland.
Planning-gain Supplement (Preparations) Bill:
more info
Political News
EU announces moves to cut CO2 emissions by 20% by 2020
In announcing proposals to introduce a common European energy policy, the European Commission are pushing for a 20% cut in Carbon Dioxide emissions by 2020, partly through an increase in the production of energy from renewable sources.
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Housing Market
Household growth could lead to housing shortage and higher house prices
If new figures on household growth are accurate, we are heading for a housing shortage and even higher prices unless we build significantly more houses, writes Steve Wilcox, from the University of York, in the latest UK Housing Review 2006/7.
The UK Housing Review, published by the Chartered Institute of Housing and the Council of Mortgage Lenders also reports that the number of households in England is now projected to grow at around 210,000 per year, thanks to a higher number of smaller family units and increasing inward migration. According to the report plans to build 200,000 new dwellings per year by 2016, would still represent a shortfall and Government should monitor household growth closely and constantly review its own targets.
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Buy-to-let investors remain optimistic despite rental yields hitting a five-year low.
Investors in Buy to Let are heading into the New Year in an optimistic frame of mind, the ARLA Review and Index for the last quarter of 2006 reports this week.
Six out of ten investment landlords expect to acquire more property in the year ahead and even if property prices were to fall, only 2.1% would sell.
However, a study of the residential investment market shows almost a third have been a landlord for a year or less, fuelling fears that a significant minority of buy-to-let investors are vulnerable to falling prices or rents failing to cover interest payments on newly acquired properties.
With rental yields hitting a five-year low of 5.74pc in 2006, Landlord Mortgages, a specialist buy-to-let broker, says recent buyers of rental properties face an income crunch as short-term discounted mortgage deals revert to higher variable rates.
Daily Telegraph, 10 January 2007
First-time buyers face tougher market
First-time buyers are finding it harder to get on the housing ladder than at any time since 1991, according to a report published this week by the Royal Institution of Chartered Surveyors.
The typical couple looking to buy a first home must save up £32,784 - equivalent to 81.8 per cent of annual take-home pay - for the deposit, stamp duty and other costs. In 1996, they needed 25.2 per cent, said the institution.
The institution said the market would get tougher in the next two years if, as it expected, prices rose by another 12 per cent.
Company News
Trading statements summary
Six house builders gave trading updates during the last week. All were made before today’s (12 January) bank rate rise.
Barratt reported (12 January) total completions up 2.9%, to 7,206, in the six months to 31st December 2006, at an average selling price of £165,000. Private completions rose 4.0% to 5,791, whereas social completions decreased 1.3% to 1,415.
Barratt’s land bank rose 11.9% to around 70,500 plots. It reported a record forward sales position (up 47%).
The company said its strong sales performance was delivered against the backdrop of “a competitive but stable market, with good buyer confidence”, describing the fundamentals of the market as “sound”. Barratt has now secured 70% of the full year’s expected volumes.
Bovis reported (9 January) housing legal completions up over 15% in preliminary results for the year ended 31st December 2006, with the average sales price up 4.7% to £183,700. Bovis said over 25% of projected 2007 legal completions were now reserved.
Galliford Try reported (9 January) housing completions up 23%, at 593, in the half year to 31st December, at an average selling price of £221,000. The housing division had sales in hand for the full year of £197 million, up 25% on last year. The company’s land bank was 4,818 plots. Galliford Try said it had successfully integrated Chartdale Homes into the Group.
Miller Homes (9 January), part of the Miller Group, sold 3,960 units in the year to December 2006, on around 140 sites, with a 65% increase in social housing completions to 267. The housing results include a full year’s contribution from the Fairclough business. Miller’s average selling price was £186,000. The company owns or controls 15,000 plots.
Miller said that outside London “the housing market remains steady with both visitor and reservation levels slightly ahead of 2005”. It had already secured 28% of 2007 sales, in line with recent years.
Miller referred to “more uncertainty in the market than for some time”, but said it had yet to seen any evidence that recent interest rate increases, and speculation that another could follow, had resulted in a slowdown in sales. Miller remains confident about future prospects, with the fundamentals of the housing market providing an “attractive environment within which to operate”.
Redrow (11 January) delivered 2,214 legal completions in the six months to 31 December, up 7% on the same period a year ago. The average selling price was virtually unchanged at approximately £162,000. Redrow had forward sales of 1,871 homes at the end of December, similar to the level a year earlier. Its current land bank had been maintained in the last six months.
Redrow said “the increasingly complex planning system continues to inhibit the industry’s ability to open new outlets and this has influenced our sales performance in the last six months”.
It described the housing market as “relatively stable” during 2006. The market remains competitive across many of Redrow’s markets, “with the stronger conditions being reported in certain areas, notably central London, not necessarily being representative of the wider housing market”.
Taylor Woodrow reported (10 January) consolidated home completions up 5.2% to 13,165 in the year ended 31st December.
UK completions were up 1.4%, at 8,294, at an average selling price of £193,000, up 4.3%. The company said “sales rates remained good in the second half”, with a 30% increase in the order book. Its UK landbank now stands at 34,827 plots.
Taylor Woodrow said the US housing market “weakened considerably” in 2006. It anticipated pre-tax land write-offs in the region of US$40 million. US home completions were up 14.2%, at 4,492, at an average selling price of US$427,000. Taylor Woodrow’s North American order book is down 39.9%.
The company also sold 379 homes in Spain and Gibraltar, down 6.7% because of delays in obtaining habitation certificates, at an average selling price of £205,000.
Taylor Woodrow said the outlook for the UK housing market remained good. “However, despite strong price appreciation at a national level, there were wide regional variations and customer confidence could be damaged if further interest rate rises materialise in 2007”.
Other News
CBI convene high-level climate change taskforce
Against the backdrop of a Government Minister having recently criticised one airline as the “irresponsible face of Capitalism” for its position, the CBI have announced the convention of a high-level taskforce to look at ways in which businesses can help to address the causes of climate change.
Comprised of the CEOs and Chairmen of companies such as Tesco, Shell, and British Airways and including Peter Redfern of George Wimpey, it will produce recommendations in a report later this year.
More info
Eastern Europeans close skills shortage gap
The influx of workers from eastern Europe has almost eliminated skills shortages in the building trade in London and the South-east, an industry report has shown.
Just one in 10 companies reported recruitment problems in the powerhouse of the UK economy in the final months of the year, it said.
The finding, in the quarterly survey by the Royal Institution of Chartered Surveyors, was the lowest skills shortage reading for the region in its 10-year history.
“Low skill shortages in the capital are helping firms limit wage, cost and price pressure,” RICS’ senior economist David Stubbs said. “The influx of labour from EU accession countries has limited wage rises.” However, the picture was not reflected across the country. In the north of England, more than seven out of 10 respondents complained of skills shortages. “This may reflect differences in the pattern of inward migration from eastern Europe,” he said.
Consultation/Key Publication Dates
Code for Sustainable Homes:
Final document launched 13 December 2006
Implementation Spring 2007
Building a Greener Future (zero carbon homes consultation)
Closes 8 March 2007
Draft PPS on Climate Change Consultation
Closes 8 March 2007
Home Information Packs (HIPs) Regulations:
Revised regulations published 14 June 2006, further revisions required
HIPs Trials November 2006 onwards
HIPs Introduction 1 June 2007
Planning-gain Supplement:
Consultation begins 6 December 06 and ends 28 February 2007
DTI/Ofgem Call for Evidence for the Review of Barriers and Incentives to Distributed Electricity Generation:
Closed 2 January 2007
Part B of Building Regulations:
Approved Document published 19 December 2006
Implementation April 2007
Proposals for
Water Regulations published 13 December
Consultation closes 9 March 2007
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Jo Turner