A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, HBF's head of media, available to members only.
Housebuilders’ Boom Has Two More Years to Run
Housebuilders are set for another two years of growth in profits, earnings and dividends, according to the construction consultancy, Fallon Stewart. The findings come from a poll of investment bankers that concludes the housing market will continue booming, but at a more moderate rate. Whilst the consultancy expects profits to be constrained by a fall in margins, this is driven primarily by rising costs of labour and materials and, in particular, land. Therefore, housebuilders will try to protect profits and earnings growth by increases in volume of more than 6%. This increase in volume, along with house price inflation of about 4%, should give housebuilders revenue growth of just over 10% - despite a fall in average margins of approximately 1.5%. The consultancy also expects housebuilders to further reward their investors with higher dividends, something that should help boost share prices which grew by just 3 – 6% over 2003. (FT)
Good Results Expected From Wimpey and Wilson Bowden
Wimpey will tomorrow announce its full-year results for 2003. And the news is expected to be good with pre-tax profits up to £360m, boosted by the first full-year contribution from Laing Homes. Also reporting is Wilson Bowden, which is also expected to deliver good news of a full-year pre-tax profit of £218m. (FT)
Buy-to-Let : The Frenzy Continues (For Now)
There is no let up in the growth of buy-to-let, with lending up from £24bn to £39bn over the last 12 months and a corresponding 48% leap in landlord numbers. Put another way, the total number of buy-to-let loans is now more than 400,000 compared to 275,000 a year ago. According to Paragon Mortgages, which compiled the figures, there seems no sign of a slowdown with landlords expecting to grow their portfolios by 9% this year – the equivalent of one extra property per landlord.
However, the good times cannot last. With a 20% increase in properties to let and tenant numbers down 11%, rents that had been keeping in line with inflation are now flat or falling. Average rents fell between 5 – 10% in the last quarter whilst in London rents are lower than they were five or six years ago, with the most expensive lets suffering most. Agents now predict that investors can expect a return of 6%, before costs, at best. After costs, returns are now at 4% - generally less than the costs of servicing the mortgage. (Times)
Fretful FTBs Stay Away
First time buyers are becoming increasingly worried that they are paying too much and could face negative equity. A new survey by the Alliance and Leicester said 21% of FTBs in London expected to end up in negative equity, whilst a third resented the feeling of panic buying in the current market. The CML also revealed that the level of FTBs remains at its record low of 27% of all loans, compared to almost 50% in 1996. (Telegraph)
Flood Game to Avert Virtual Disaster
Planners have a new computer game to play with – FloodRanger. The “game” is based on the most up-to-date data available and allows planners (or housebuilders?) to test their skills in building virtual flood defences without bankrupting their budgets. Annual economic costs of flooding are expected to soar as global warming increases and the “game” puts players in charge of a virtual terrain for which they have to maintain housing and employment growth for an expanding population while keeping flood defence works on budget. Launching FloodRanger, the Government’s Chief Scientific Advisor, Sir David King, said: “It is an innovative new tool to be used as a learning process for anyone involved with flood management.” (Times)
Met Prepares to Sell Off Police Stations
The Metropolitan Police is preparing to sell off 60% of its police stations to developers. Between next year and 2015, the force will sell £900m worth of its property, much of which is situated in prime locations. A decision has yet to be made whether to sell the stock piecemeal or sell it at attractive prices in one or two large chunks. Officers will be relocated to “front offices” in places like shopping centres and public libraries. (FT)
Government Cracks Down on Livingstone’s Affordability Threat
The government has watered down Ken Livingstone’s threat to take councils to court if they fail to hit his 50% affordable housing diktat. The ODPM said the London Plan did not give the Mayor the right to dictate targets to boroughs, although Livingstone originally claimed that it did. A Government spokesman said: “There is a legal requirement that borough development plans are in general conformity with the London Plan. However, it is for boroughs to determine their affordable housing targets….which must be applied flexibly. If the Mayor considers a borough plan is not in general conformity with the Plan, he can object and his objections will be considered, with others, at a borough plan enquiry.” (EG)
Government Now Encourages Youngsters to Learn Trades
School pupils from the age of 14 will be allowed to leave the classroom for two days a week to learn a trade under government plans to tackle skills shortages. Under a young apprentice scheme they will learn alongside skilled workers. The plan might include providing them with a certificate at 16, showing their achievements, that they could then use to try and get a full-time paid apprenticeship on leaving school. (Telegraph, Mail)
Britain’s Old Homes Are Crumbling
It’s taken some time, but the media has finally cottoned onto the fact that the country’s old housing stock is falling to pieces. A survey by the Energy Savings Trust reveals that each year £1.25bn is spent on unexpected repairs by people who have just moved house – an average £2,500 per house.
HBF Note: The Express picked up this story last week but more have followed suit. The Trust has also prepared a useful table listing the most common faults, the percentage of buyers who suffer them, and how much they cost to put right.