A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, HBF's head of media, available to members only.
Bank of England warns of possible crash
Mervyn King, governor of the Bank of England, has issued his sternest warning yet of a possible house price crash. He told a CBI conference that interest rates could rise faster than market expectations and said: “Anyone entering or moving within the housing market should consider carefully the possible future paths of house prices and interest rates.” King also suggested prices might be overvalued: “After the hectic pace of price rises over the past year it is clear that the chances of falls are greater than they were.” (All media)
HBF note: Headline grabbing stuff - but does he mean it? So far, the only thing to have increased more than house prices is the number of housing market “expert” commentators. Their views have undoubtedly boosted the market to what is now seen as a dangerous level. The chances are that King is simply trying to boost his so far rather ineffectual series of interest rate rises with some stern talk before any real problems occur. Interesting to see that one leading commentator has publicly accused King of possibly talking the market into a crash. Why this commentator is worried is a mystery given that he earlier said there was more chance of finding Elvis on the moon than of a crash…
Blair says “Homes as important as health”
On the back of Mervyn King’s comments and the subsequent storm of media comment, Tony Blair has promised that more housebuilding will form a centrepiece of Labour’s General Election manifesto. He said housing was a vital election issue and it was reported that restrictions on building on greenfield sites will be further relaxed. Gordon Brown also joined the call for more homes at his Mansion House speech in which he said government would tackle the “unacceptable” gap between supply and demand for housing. He also praised the Bank of England for putting up interest rates to put a brake on the market. (Standard)
Speculation and interest rates start to bite
The latest rise in interest rates together with intense media speculation about the housing market has delivered the first signs of a slowdown according to the Rics. But there is no sign of a pending fall in prices as the amount of property on the market remains limited and buy-to-let investors are holding their nerve. A Rics spokesman said: “So far, the data suggests that only buyers, rather than owners or sellers, have started to be concerned by the prospect of higher rates. Overall, the market seems to be remaining strong, particularly in the North, Wales and Scotland. Meanwhile, prices in London have stalled. (Business)
King’s comments knock share prices
True to form, twitchy investors responded to Mervyn King’s comments, resulting is slight share price falls in major housebuilding firms. Bellway and Wilson Bowden fell 27p to 738p and 33p to 1024p respectively, while George Wimpey lost 10p to 368p and Redrow 7p to 326p. (All media)
IoD Warns of Crash
The Institute of Directors is the latest professional organisation to join the growing list of doom-mongers. It believes that if interest rates rise to 5 percent, the chances of a slump will be 50:50. If rates rise up to 5.5%, as many economists expect, the chances of a crash are “far more likely”. However, the worsening prognosis for the market by industry bodies is not a view shared by homeowners. A survey by the Woolwich says 70 percent of householders expect prices to carry on rising - 11 percent higher than at the start of the year. (Sunday Times, Sunday Telegraph, Mail)
Market Towns Boom
Jaded city-dwellers opting for a country life have sent prices soaring in England’s market towns. Average prices in these towns have more than doubled in the past decade, whilst some have seen prices rocket. The Halifax monitored rises between 1995 and 2003 in 112 market towns and all but four had seen prices more than double. Midhurst in West Sussex is in pole position with a rise of 223 percent and Bodmin in Cornwall on 221%. (All media)
HBF note: Evidence that homebuyers want traditional homes in a village setting is piling up. One-in-five estate agents admits to renaming suburbs “villages” to raise their appeal. The PPG3 drive for higher density and flats is successful and continues apace. But this must be balanced by providing what a substantial proportion of homebuyers want. Sustainable communities means providing the broad mix of housing that a community needs to thrive, all of which is deliverable in a PPG3 compliant manner - if planning allows.
Second homes angst grows in rural Britain
The expansion of - but in reality still very limited - second home ownership, has been a major feature of media attention in the past week. Concentrating on the West Country, the region with by far the highest proportion of second homes, the articles suggested the problem was almost unsolvable, despite the increasing and varied attempts by some local authorities to tackle the “problem”. The coverage of the issue follows on from earlier reports on how second homes ownership was causing problems for local schools unable to recruit sufficient pupils. (Telegraph, Times)
HBF note: Telegraph commentary suggests constraints on rural housebuilding are to blame and says only increased supply can provide the residents needed to keep local economies alive. It concludes: “Build more houses in nice parts of Britain. It will make people happy.”
Parents count cost of property boom
Parents can expect to spend an average £17,000 to help each of their children get a foot on the housing ladder according to a MORI poll for the Joseph Rowntree Foundation. The survey suggests parents are beginning to realise the cost of the housing boom brought on by the lack of housebuilding. Lord Best for JRF, said: “Homes will only become more affordable when we have increased the level of housebuilding in areas where shortages are acute.” (All media)
Livingstone’s re-election demands for greener housing
Ken Livingstone’s successful bid for a second term as London’s mayor is likely to see him push further for a “greening” of the capital - including tougher standards for new housing. Whilst transport is likely to be his main focus, Livingstone, said: “I will use all my planning powers to make sure new buildings use clean, green technology like solar panels.” (Independent on Sunday)
South East Has “Less water than Sudan”
The South East has less water per person than the desert states of Syria and Sudan, according to official figures. Before going on to warn of the cost of housebuilding plans in the South East, the Environment Agency statistics indicated 58,000 gallons are available for each resident in the region against a national average of almost 300,000 gallons. By comparison, the Sudan has 269,000 gallons per person whilst Spain has 610,000 - twice the average level in England. Urging that much more infrastructure improvement was needed to minimise wastage and capture rainfall, the Environment Agency said of the region’s housebuilding plans: “We don’t have the water or infrastructure to cope with this. All the predictions suggest the South-East will become drier in the next 20 years - at a time when demand will certainly increase.” (Sunday Telegraph)
HBF note: Concerns about water supply in the South East are not new. However, whilst an increase in housing supply might be a concern, it is not the principal worry of the Environment Agency, which notes the efficiency of new homes and says the real focus should be on tackling wastage and effective capture of supplies, ie. proper investment in infrastructure.
Butt there is a housing crisis…
“Tanked up on alco-stats, the hooligan housing lobby has gone berserk…” says Simon Jenkins in the Times. Incensed no doubt by the government’s renewed pledge to tackle the housing crisis, the newspaper’s columnist has plumbed new depths in attacking housing economists. “They tattoo their faces with skulls-and-bulldozers and their bottoms with House Builders Federation logos. They chant ‘Nimby bastards’, ‘John Prescott OK’ and ‘Smash the f****** greenbelt'.”
HBF Note: An incisive if not-so-balanced piece by the Times’ veteran anti-development scribe.
Editor’s note: HBF Weekly News Summary returns week commencing July 4.