A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, the HBF's head of media. Available to members only.
Buyer’s Market as Rates Bite Harder…
Further evidence of a cooling in the market has emerged with two leading surveys showing that prices have started falling in many areas. The Rics this week reported that recent interest rates have put the brakes on the market to such an extent that the market is now at its weakest point since the Iraq war while Rightmove said the rate of average price increases has slowed dramatically and that it was now a “buyer’s market” with 4% more properties on the market than a month ago and prospective buyers down by 30% since April. Northern Rock has also said prices have slowed markedly within the M25 and that a ripple effect across the country can be expected. The lender is also reducing its exposure to risk by increasingly shunning first time buyers. (Sunday Telegraph, Sunday Times, FT)
…but Mortgage Lending Surge Adds to Rate Pressures
The housing market might be cooling but mortgage lending surged to a record £27.8bn in June. The number of new loans agreed also leapt to 123,000 in June - up from 110,000 in May, said the Council of Mortgage Lenders. All this suggests that recent rate rises have been insufficient to take the heat out of the housing market and adds pressure for a further rate hike next month. HSBC said: “The Bank of England clearly has more work to do to bring the housing market under control.” (All media)
HBF Note: The contradiction between slowing prices and greater lending initially suggests that the slowing market simply needs a little more time to make itself felt. However, the increased number of mortgage approvals would appear to scotch that theory - unless this points to a last scramble for affordability at the lower end of the market. The “will it, won’t it” debate on rates continues apace with much conflicting thought as to what will happen.
Bootle Calls on MPC to Consider House Prices
City economist Roger Bootle has called for the Bank of England’s Monetary Policy Committee to change the way it considers interest rate policy and takes house prices into account. By concentrating too much on short-term factors in trying to keep a lid on inflation, he argues that longer-term trends in housing and stockmarkets are not given sufficient consideration - a situation that produces damaging market cycles. (Sunday Telegraph)
Homelessness Doubles Under Labour
The number of homeless families in Britain is set to hit 100,000 for the first time by the end of this year - having more than doubled since Labour came to power. This is the forecast from homeless charity Shelter, whose study mirrors that of charity Crisis, which last week said Britain was harbouring an army of hidden homeless, expected to reach 1 million by 2020. Official figures show the average length of stay in temporary accommodation has tripled over the same period. These figures highlight once again the extent of Britain’s worsening housing supply crisis. (Observer)
Stamp Duty to be Abolished for FTBs?
Stamp Duty reform could include scrapping the tax for first time buyers, the government has hinted. Promising “more help for people to get on the housing ladder”, Cabinet Minister Tessa Jowell said government was looking at “reform of Stamp Duty, including an exemption for first time buyers”. This has prompted a guessing game that FTBs will be exempt from the tax on purchases up to £250,000. If this happens, the “loss” to Treasury will almost certainly be made up for in increased rates for more expensive properties. (All media)
Housebuilders “Go-downmarket”
Housebuilders are responding to Government calls for affordable housing and the tougher market conditions by shifting towards non-luxury, smaller units - mainly on brownfield sites. Berkeley’s announcement that it was abandoning traditional housebuilding in suburban areas may have caught the headlines but other large developers are increasingly turning to regeneration. Peter Redfern, managing director of George Wimpey, which now produces more than two-thirds of output on brownfield compared with less than half four years ago, said: “We’ll look more critically at the top end of the market and think we’ll do more affordable housing.”
Beechwood’s Red Tape Nightmare
The speed hump demanded by a council outside a Beechwood development should only have cost £3,000. But the council’s obsessive need to “supervise” the hump’s construction landed the developers with a bill for £12,000. This ludicrous story of needless but costly council bureaucracy forms part of an Institute of Directors casebook of similar stories published this week. Beechwood managing director, Robert Parker explained how his dispute with the council had seen the bill reduced to £8,000 but had cost him dearly in terms of frustration and wasted time. The IoD said: “Mr Parker’s saga of negotiation has been going on for months. He has a file of 30 to 40 letters between him and the council just about this one issue.” (Telegraph)
Natural Flood Defence Plan for Thames Gateway
The Environment Agency and London Development Agency have proposed solving potential flood problems on the Thames gateway with a string of wetlands, parks and riverside paths, instead of barrier-type defences. Importantly, the Association of British Insurers, which had earlier warned that new homes built in the gateway might be uninsurable, said the system might solve the problem. Pierre Williams for HBF, said: “Managing floodwater might well be more efficient and cost effective than expensive barrier-type defences. But the real test will be whether they work in practice and how much it will cost. We need the promises to be backed up with major public investment.” (Standard)
Lib Dems Call for Mortgage Restrictions
The Liberal Democrats have called on government to impose restrictions on mortgage lending companies to rein in the market. They say that with recent interest rate rises having had little effect, government regulation on borrowing is the answer. They want government to introduce reserve requirements where lenders have to lodge a chunk of their assets with the Bank of England. By adjusting the size of this requirement, government can limit the ability of lenders to offer new loans. Lib Dem Treasury spokesman Vincent Cable, said: “This policy would stop some of the excesses which threaten serious financial difficulty for many borrowers when the market goes into a downturn.” (Guardian)
HBF Note: Just how such a system might work when with the Bank now having autonomy, is unclear.
Government Re-defines Rural Areas
The government has re-defined all towns with populations of more than 10,000 as urban settlements. This means “rural” England has officially shrunk by one-third and that the number of people living in the countryside is down from 14m to 9.5m. The reasons for the change and its likely impact are unclear, although it is thought that this will channel government funding away from rural to urban areas - a view seen by the Spectator as a means by which government can “lavish money on its natural supporters”. (Times)
Marriage Thrives in “Blissville”
It has a charming mix of new and older detached houses, cottages and bungalows together with all the necessary community facilities. Pannal, in North Yorkshire is also the nation’s marriage capital where, according to Government figures, a record 72.5% of its adult residents are married. In short, it provides the type of homes and facilities that repeated surveys revel what people want. (Mail)