A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, HBF's head of media, available to members only.
Persimmons Record Performance
Persimmon has reported a record 32% rise in full-year profits to 352m a performance that looks set to continue with 240m of forward sales. The company benefited from strong price growth in the North with a 29% rise in average selling prices. Nationwide, the group saw average prices rise 12% to 154,810. CEO John White said interest rate rises had had little effect on buyers who continued to buy homes whilst they remained confident about job prospects. The groups added extras range is also doing well with average customer spend of 3,500. As a result of such strong forward sales, shares are at a 5-year high. (Times, Telegraph, Express, Mail)
HBF Note: Strong forward sales and operations pitched firmly at the right price bracket in the right areas, all make Persimmon the darling of the sector says the Telegraph. Despite yesterdays share price gain of 23p to 594p, the FT comments: Its not right and its not fair anywhere else this sort of performance would have investors going wild.
Wilson Bowden: Delivering Profits and Housing
Wilson Bowden has reported record full-year pre-tax profits of 223m up from 173m and a 20% rise in completions. Acquisition of Henry Boot and Ward played a major part in this success but the company also saw organic growth of 6%. While admitting that he would love to do another Henry Boot, CEO Ian Robertson was very upbeat on future growth. He said: This year we are further ahead with planning and sites than we were last year. The increased number of sites we have opened this year will deliver significant organic growth and we are actively looking for more strategic infill acquisitions. Earnings per share and final dividends also saw healthy increases. (FT)
HBF Note: Excellent profits and increased output - just whats needed to counter claims of deliberate undersupply.
Taylor Woodrow Profits Leap
Taylor Woodrow has reported a 30% rise in pre-tax profits to 304m in 2003. The companys UK completions performance was helped by its takeover last year of Wilcon and it predicts a buoyant year ahead as UK demand continues to outstrip supply. Chairman Norman Askew, said: We have delivered strong financial results due to good positioning in our markets, complemented by the benefits of the business realignment which we announced last year. The successful acquisition of Wilson Connolly in October 2003 will be a further driver of growth in the coming years. (BBC)
Price Rises Moderate?
In case any more scepticism of house price indexes was needed, Hometrack said average prices rose 0.9% last month to 148,500, whilst just a week earlier, the Nationwide said prices had jumped 3.1% over the same period. Despite the big discrepancy, the British Bankers Association appeared to confirm strong growth with a surge in net new mortgage lending in January and an 11% rise in mortgage approvals compared with this time last year. In a separate story, investment bankers Durlacher have joined those predicting housing market doom with a forecast 45% slump in prices. This has been dismissed as headline-grabbing claptrap.
(Times, FT, Telegraph, Mail)
HBF Note: Not surprisingly, the Nationwides figures received much greater media coverage than Hometracks more moderate claim. Big figures help the index providers visibility but they also increase speculation of a future crash as well as pressure to increase interest rates.
Tariffs: More Work Needed
Government says its proposal for planning gain tariffs needs more thought if it is going to be a success. At a House of Lords debate last week, in which many argued for the proposal to be scrapped but HBF argued for retention, Planning Minister Lord Rooker admitted the plan hadnt been thought through properly. In conclusion, the ODPM said it intended to retain the tariffs element in the Planning Bill but added: Theres going to be an announcement on how we will take the discussion forward. There will be more consultation to see how it works in practice. (Trade press)
Cabe Chief Appointed As Housing Corporation Boss
The former boss of the governments design watchdog, Cabe, has been appointed chief executive of the Housing Corporation. Despite initial rumours that the Corporation was due to face a fundamental shake-up, the latest news is that it will emerge largely unscathed from a government review of its future. Jon Rouse said his number one aim was to reinvigorate the corporations sense of purpose. (Trade press)
Co-op Pulls Plug on Self-Certification Mortgages
As concerns about unscrupulous lending spread, the Co-operative Bank has pulled out of the self-certification mortgage market, despite the success of its products. The bank said: It has become apparent that unscrupulous practices are occurring and were withdrawing from the market with immediate effect. Other banks look set to follow suit. The HBOS is currently tightening lending criteria to higher-risk borrowers. (Sunday Telegraph, Mail)
Britons Borrowing Frenzy Continues
Britons are ignoring the Bank of England warnings and continuing to borrow heavily. Credit card and overdraft debt more than doubled in January, all putting more pressure on interest rates. Most economists expect a quarter-point rise to 4.25% in May, but these latest figures suggest the next rise might come sooner that this. (FT, Times, Mail)
Taylor Woodrow Concludes Docklands Sale
Taylor Woodrow has sold its St Katherines Dock development for 283m to Reit Asset Management. The sale means the disposal of the companys last major investment property and allows the firm to concentrate on more housebuilding. (FT)
IHT to Hit 20% of Families
The Chancellors crackdown on Inheritance Tax avoidance comes into force on April 6 with income tax payable by anyone who continues to use major capital assets after they have disposed of them. The government also expects that the percentage of estates that pay IHT will rise by a quarter this year and accountants believe this will result in 20% of families now facing a charge on their estates. At the same time, the Inland Revenue will now be able to charge an effective 50% tax rate from those with extra income from buy-to-let or other investments. From April, they can be charged monthly on their entire earnings through PAYE, whereas to date, they have settled by paying an annual tax bill. (All media)
Government Regeneration: Lots of Money, Little Result
The Government is throwing money at regeneration but with little result. Thats what DTi minister Stephen Timms told an American audience last week. He also admitted that Government saw this lack of delivery as a potential Achilles heel. Too often a lot of money has been spent but very little seems to have been achieved, he said. In a year or so were going to have an election in the UK when people will say weve paid a lot of taxes but what has really been achieved with all that money?. The admission later provoked an angry response from John Prescotts department. (Trade press)
Higher and Tighter to Meet Social Goals
Media awareness of the massive shift towards higher density housing is emerging. The subject was reported in major articles in both the FT and Sunday Telegraph this week. In the South East, the proportion of detached completions has fallen from 47% to 19% since Labour came to power while the proportion of flats completions has jumped 14% to 46%. The shift has presented a host of challenges, opportunities and threats to the industry.
HBF Note: This is a subject likely to get increasing attention both positive and negative of which the central element will be whether this is a policy which has gone too far, too quickly, or not. The density issue forms part of a major article by the FT on how government might respond to the final Barker and Miles reports published later this month.