A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Political News
Conservatives propose changing rent into mortgage payments for council tenants…
In a keynote speech to a Conservative First Time Buyers Summit in Westminster, the party’s leader David Cameron called for council tenants to be able to convert rent payments into a mortgage. Mr Cameron said: “Isn't it time to look at a scheme where we can actually say to council tenants, housing association tenants, why not change your rent payments into mortgage payments, so that as you pay that payment over time you will own that flat, you will own that home?"
The leader of the opposition also called for a change to the planning system to assist in increasing the supply of new homes by incentivising local communities: “So we need to look at the whole system of incentives which operate at the moment, to ensure communities not only have a bigger say in shaping development, but also get their fair share of the economic benefit that development can bring."
The Party made other pledges at the conference including opening up shared ownership schemes to a wider section of the community, and continuing to campaign against the Government’s “half-baked” Home Information Packs. (Conservatives' Press Release)
… and launch campaign to stop development on back gardens
The Conservatives launched a new campaign to “protect England's gardens and suburban neighbourhoods from being concreted over and over-developed, and build more family homes rather than pokey one-bedroom flats”. The five point plan pledges to change planning rules to conserve green spaces maintaining the character of local neighbourhoods, encourage more family homes with suitable parking and garden space to be built instead of “pokey” flats, give local communities a stronger say on where new homes are built, cancel Government plans for a council tax revaluation and stop new taxes being levied on home improvements, and help more people get onto the housing ladder through shared and flexible forms of ownership.
Shadow Secretary of State for Local Government Caroline Spelman said: “Across the country, there is growing concern about how John Prescott's planning rules are leading to leafy gardens being dug up and replaced with soulless and ugly blocks of flats. The price of family homes is artificially inflated due to developers being forced to build flats. Local people are increasingly powerless to protect the character of their neighbourhood, and communities are suffering from the extra burden being placed on local infrastructure. These planning rules prevent the development of new homes that the public actually want - family homes with sufficient parking spaces and gardens for children to play in." (Campaign Launch Press Release)
Economic News
Inflation recedes, but remains above target…
Consumer Prices Index inflation, the Bank of England’s target measure, fell back from 2.5% in June to 2.4% in July, although it remains above the centre of the target range of 2.0%, +/- 1.0%. The most significant factors behind this small decline were sales in a wide range of furniture items and fairly stable bank charges compared to increases a year ago. The Retail Prices Index (RPI) measure of inflation was unchanged at 3.3%, while the former target measure RPIX, which excludes mortgage interest payments from the RPI, was also unchanged, at 3.1%. (July Consumer Prices Index)
… while unemployment hits a six year high…
The ILO measure of unemployment rose to 5.5% in the second quarter of the year, an increase from 5.2% in the first quarter, and the highest the rate has been in over six years. Despite the rise in unemployment, the total number of people in full time employment continued to increase, so the rise in the rate of unemployment is largely due to an expansion in the pool of available labour. The claimant-count measure of unemployment rose by 3,000 in July, as this rate remained unchanged from the previous month at 3.0%. A total of 957,000 people claimed the Jobseeker’s Allowance in July, the highest monthly figure since January 2002.
Earnings growth accelerated a little in the second quarter of the year. Headline average earnings (which include bonus payments) were 4.3% higher in the second quarter compared to the same period a year earlier, accelerating from growth of 4.1% in the three months to May compared to the same period a year earlier. (August Labour Market Statistics)
… retail sales fall back, but remain robust
The volume of retail sales fell by a seasonally adjusted 0.3% between June and July, although the annual rate of growth rose from 3.6% to 4.0%. Sales in the three months to July were 3.9% higher than a year ago, the highest this measure has been since the end of 2004. (July Retail Sales)
… and the chances of another rate hike recede slightly
The minutes of the Bank of England’s Monetary Policy Committee meeting on 2/3 August, where interest rates were increased by 25 basis points, hinted that the financial markets may have over estimated the likelihood of a further rate rise this year. Of the current seven member Committee, six backed the increase while David Blanchflower favoured no change. The minutes also stated: “Most members thought that increasing interest rates to 4.75% would most likely remove a degree of monetary accommodation, without retraining demand unduly; and that there would be time to reverse any increase should that prove necessary once the medium-term paths of demand growth and inflation became clearer.” (MPC Minutes)
Housing Market
Official statistics show a slowing in house price growth…
The Department of Communities and Local Government (DCLG) reported that house prices rose by an non seasonally-adjusted 0.4% in June, while the annual rate of increase fell from 5.6% to 5.2%. The regional picture painted by the DCLG shows a slowing in the annual rate of price growth in London from 7.0% to 5.8%, with all the southern regions seeing slightly slower growth than the previous month. The sharpest slowdown was in the North East (from 7.7% to 5.5%), the North West also saw a deceleration (6.1% to 4.9%), while there was an acceleration in Yorkshire and the Humber (6.0% to 6.7%). (DCLG June House Price Index)
… but the Land Registry report an acceleration…
The Land Registry reported that the annual rate of house price growth accelerated to 7.7% in the second quarter, from 5.1% in the first three months of the year. Prices increased by a non seasonally-adjusted 3.3% from the first to the second quarter. The price of new homes fell by 0.6% over the year, driven by a fall in the average price paid for new flats (-1.3%). All other types of new homes saw a rise in prices. (Land Registry Q2 Residential Property Price Report)
… and RICS report a further tightening of the market
The Royal Institution of Chartered Surveyors reported that house prices rose in the three months to July in all regions of England, Scotland and Wales, for the first time in two years “although there remain large variations in the pace of price rises across the UK” with London and the South East leading the way. The balance of surveyors reporting that prices rose in the period was at +31%, up from +28% in the previous survey and the ninth successive month that has seen a rise.
With buyer interest continuing to rise and the amount of unsold stock per surveyor on the market falling to the lowest level since September 2004, RICS expect that “a more limited choice of properties for potential buyers should give vendors greater bargaining power in the months ahead. This situation is unlikely to change immediately following the August interest rate rise.” (www.rics.org.uk)
Buy-to-Let lending hits record high
The number of residential buy-to-let (BTL) loans advanced in the first half of 2006 rose by 17% in comparison to the first half of 2005 to reach 152,500, according to the Council of Mortgage Lenders (CML). There are now a record 767,600 outstanding BTL mortgages in the UK, which equates to 8.3% of the total market, up from 6.9% a year ago. The share of BTL mortgages in three months or more of arrears rose from 0.68% to 0.73%, but remains lower than the wider market level of 0.96%.
CML Director General Michael Coogan commented: “The buy-to-let market remains robust, underpinned by strong rental demand. But investors have shown that they are quick to adjust to changing market conditions, so the view that interest rates are now more firmly on an upward trend is likely to cause the rapid growth of buy-to-let investment to slow in the coming months. Fundamentally, however, the rental market remains sound and looks set to continue to offer good long-term prospects for astute investors.” (CML Press Release)
Affordability set to worsen in the South West
The South West is the only region in the country with above average house prices but below average incomes, and the outlook for first time buyers is expected to worsen over the next five years, according to projections from Oxford Economic Forecasting, which were jointly published by the National Housing Federation (NHF) and Chartered Institute of Housing. The projections see average house prices in the region reaching almost £300,000, up 40% from current levels, and earnings growth will not keep pace.
Derek Cash, Head of South Region for the NHF, commented:” The South West is a beautiful place, one that vast numbers of people want to enjoy. But the housing crisis is a key concern for many people and agencies in the region – more and more people are priced out of buying, with little hope of getting an affordable rented home. Young local people and key public sector workers will continue to move to cheaper parts of the country to ease their housing problems, making essential public services increasingly vulnerable.” (NHF Press Release)
Other News
House building slows a little in the second quarter
The Department of Communities and Local Government (DCLG) published official house building statistics for the second quarter, showing that the number of private housing starts declined from the first quarter in England. The private sector registered 42,630 starts, 5.2% fewer than in the second quarter a year earlier. However, following the 17.3% annual increase in private starts in the first quarter, the first half f the year as a whole saw a 4.9% increase in starts compared to the first half of 2005. The South East and South West were the regions that saw the largest increase in the number of private starts in the first half of the year, while the West Midlands, East and London have seen small declines. (DCLG Q2 House Building Press Release)
New Chief Executive for Thames Gateway
Current Chief Executive of Medway Council Judith Armitt is to be the new Chief Executive of the Thames Gateway, with responsibility for driving the delivery of the Thames Gateway Programme and implementing the Strategic Framework. Secretary of State for Communities and Local Government Ruth Kelly commented: “I am delighted to announce this appointment. Judith has a proven track record of leadership and delivering high profile projects at Medway and will bring valuable skills and experience to this new role. The Thames Gateway gives us a unique opportunity to create the sort of communities in which we all want to live. We are moving into an exciting phase of that programme and I am confident Judith will lead its success." (DCLG Press Release)
Clarification of Design and Access Statements article in last week’s News Summary
In last week's News Summary we reported the new requirement for planning applications to be accompanied by design and access statements. The wording suggested that the new statements were only required with outline applications whereas they are in fact required for almost all types of application. We apologise for any confusion this may have caused. The impact of this requirement will, however, be greatest on outline applications where principles and parameters of the proposed development will now have to be included and established at outline stage thereby rendering the "red line" outline application obsolete.
Consultation/Key Publication Dates
Code for Sustainable Homes Implementation Autumn
Home Information Packs (HIPs) Revised regulations 14 June
HIPs – 10 to 12 planned trials Autumn 2006
HIPs Introduction 1 June 2007
Consultation on DCLG structure June 2006
Implementation of new DCLG structure September 2006
HBF Events
HBF Annual Planning Conference 14 September
Housing Market Intelligence 2006 10 October
Housebuilding 2006
Business Design Centre, London N1 10 &11 October 2006
For a full list of HBF events please visit HBF Events & Meetings
For details of HB Media events click here
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
Housebuilding 2006
10 and 11 October 2006, Business Design Centre, London N1
Now in its third year the exhibition, housing market intelligence conference, management conference programme, free briefings and the Housebuilding Innovation Awards bring together all that is new in the housebuilding industry.
Visit http://www.housebuilding2006.com/ for more information.
Pre-register today to be entered in to a prize draw to win two trips to the Ashes Down Under (match tickets, flights and accommodation)