A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
HBF News
HBF responds to Select Committee Report
HBF has backed the conclusions of a Select Committee report into affordability and the supply of housing (see Political News section for summary). HBF Executive Chairman Stewart Baseley commented: “We fully endorse the report’s central conclusion that housing output must meet demand. If housing output remains at the 2005 level, there will be a shortfall of 50,000 homes every year and affordability will continue to be an issue. The only way of delivering long-term affordability is to increase supply, and this, critically, must mean bringing forward more land for development. We share the Committee’s conviction that different groups have different housing needs and aspirations. Social rented housing is part of the solution, but affordability problems will remain if the demand for market housing is not adequately met. There is a need for greater flexibility within the planning system as well as greater output so that home builders can more effectively cater to consumer demands and aspirations across the board.” (HBF Press Release)
Economic News
No obvious signs of a change in monetary policy
The minutes from the Bank of England’s Monetary Policy Committee (MPC) meeting on 7/8 June, at which rates were left unchanged, gave no obvious sign of whether there will be a change in the repo rate before the end of this year, despite the fact that the financial markets are pricing in a 25 basis point increase.
The minutes noted several upside risks to the inflation outlook, including growth in the euro area, a lower level of spare capacity in the economy than the Bank had previously assumed, the strength of broad money growth and sharp increases in asset prices over the past year. On the other hand, the minutes also noted a number of downside risks to the outlook, with questions over whether the recent “correction of financial markets might prove temporary” or “that asset prices might fall further in the coming months.” With the Committee one short of its quota of nine members following Stephen Nickell (who had voted for a cut in recent meetings) stepping down from the MPC, seven voted for no change in rates, while David Walton preferred a 25 basis point increase in the repo rate. (Minutes of June MPC Meeting)
The Bank announced the death of David Walton: “It is with great sadness that the Bank of England has learnt that David Walton, an external member of the Monetary Policy Committee, died yesterday evening [21 June], unexpectedly and after a short illness.” Governor, Mervyn King, said: "All our thoughts are with David's wife, his young children and his parents. David inspired the respect and affection of all his colleagues in the Bank, and today's news has come as a shock to us all, as it will to those who knew him in the City, where he made his reputation as an economist." (Press Release)
Political News
Select Committee backs Governments plans to increase house building
The ODPM (now DCLG) Select Committee on Housing, Planning, Local Government and the Regions backed aspirations to increase the number of new homes being built each year, but pointed out that the Government’s objective of 200,000 new homes per annum by 2016 may not be enough to keep pace with household growth. The Committee’s third report on ”Affordability and the Supply of Housing” made a raft of conclusions and recommendations.
The Committee does not believe the draft PPS3 commitment to promote brownfield development gives local authorities the “tools necessary to implement this commitment”. The report raises concerns that the “sequential approach to prioritising brownfield land in PPG3” appears to have been abolished in the draft and recommends that the “draft PPS3 be revised to provide for the retention of the sequential approach”.
The Committee said that “a simple supply and demand model cannot be applied uncritically to the behaviour of the housing market and house prices”, with factors other than supply affecting affordability. The report observed that “existing house-building targets are not yet being achieved” with a number of sites that have been allocated for housing not having been taken up, and suggested there is the potential to increase output via such sites.
The Committee pointed out that “higher density does not have to comprise smaller units or a preponderance of flats” and “a range of unit sizes which caters for a range of needs is required”. The report noted some concerns on Modern Methods of Construction, although it acknowledged some benefits, pointing out that “prefabrication demonstrates the potential problems of poor design and the major maintenance problems which can arise… It is important that both house buyers and house builders are confident that their new homes are mortgageable.”
The report also observed that “water consumption can be reduced through improved standards of efficiency in new and existing housing”, while there is “huge potential to improve the environmental efficiency of existing homes.”
Finally, the report raised concerns that an increase in supply may lead to “a significant proportion of extra homes in some parts of the country” being taken up as second homes. (Link to Select Committee Report)
Independent assessment of social housing announced
Secretary of State for Communities and Local Government Ruth Kelly announced that Professor John Hall will carry out an independent assessment of social housing and report his views on the role of social housing in the 21st century by the end of the year. The report will look at how social housing can “unlock peoples’ potential”.
Ms Kelly also outlined her own views on social housing in a speech to the Chartered Institute of Housing Conference on 20 June. The Minister highlighted the benefits of mixed communities, and said that an objective is “to promote social mobility.” The Minister wants an extension of shared ownership schemes: “I want every local authority and every housing association not currently involved in Social Homebuy to look hard at why that is and really question whether not taking part is good for their tenants.” (Link to Minister's Speech)
Commons debate on brownfield definition
Shadow Secretary of State Caroline Spelman called for the removal of back gardens from the definition of previously developed land, which would return decisions over development on these sites to the discretion of local planning authorities. In a House of Commons debate, Mrs Spelman claimed that “the perverse consequence of an affordable housing quota for larger developments of 25 or more dwellings is driving the more lucrative option of garden development, which is below that exact threshold.” The Shadow Minister said that the “simplest and most effective measure they [the Government] could take is to amend Planning Policy Statement 3 so that gardens are no longer classified as brownfield sites”. (De Havilland)
Corporate News
Crest Nicholson announced interim results
Crest Nicholson announced interim results for the six months to 30 April, with pre-tax profits at £39.2m over the period, down 19.8% compared to the same period twelve months earlier, on turnover of £355.1m. The company completed 1,062 open market homes, up 2.5%, and 516 affordable homes, up 72%. The short-term landbank was increased by 2.2% to 16,252 plots, equating to around 5 years supply.
Chief Executive Stephen Stone offered a fairly upbeat view of the market: “The current housing market is steady - reservation rates are better than in the comparative period and we are seeing sufficient house price growth to offset build cost inflation. In our view, the fundamentals of the housing market remain sound – supply continues to be constrained and demand is supported by good employment levels and low interest rates.” (Crest Nicholson Interim Results)
Barratt secures funding from Housing Corporation
Barratt became the first private house builder to agree a contract with the Housing Corporation to build subsidised affordable homes in England. The initial grant is £4.37m to build 153 affordable homes in the North West and Midlands.
Housing Corporation Chairman Peter Dixon said: “We see this as the start of a long term relationship with the company which I hope will see us build many homes together. And this is just the start. In total nine private developers are set to receive funding from the Housing Corporation. We hope to make further announcements shortly.”
Barratt Chief Executive David Pretty commented: “I believe that this historic contract which we have agreed today to secure direct funding from the Housing Corporation not only acknowledges the skills, experience and innovation that have long been our house building hallmarks, but also recognises the new thinking we at Barratt have brought to the whole question of affordable housing provision. We face a serious shortage of high-quality affordable homes in Britain today, and contracts like this will help make a difference.” (Housing Corporation Press Release)
Keith Miller named Scotland’s entrepreneur of the year
Keith Miller, chief executive of the UK’s largest private house builder Miller Group, has been named as Scotland’s entrepreneur of the year. The judges said that Mr Miller had identified the need for strategic change to move the Group away from its traditional base in construction, civil engineering and mining and into property and house building. Mr Miller now goes forward into the finals of the UK Entrepreneur of the Year in October. (Financial Times)
Housing Market
House prices continue to rise
House prices rose by 0.8% from 7 May to 10 June according to the Rightmove House Price Index, to stand 6.4% higher than a year ago. Rightmove highlighted the surge in the south, where prices have risen by 9.4% over the last year, compared to the north, which has seen a much more modest increase of 2.7%.
Rightmove Commercial Director Miles Shipside said: “The buoyancy of the
southern economy and demand for quality property by affluent buyers are having the effect of increasing homeowners’ net worth even further. With hindsight, the best time to move from the north to the south and ‘bridge the gap’ was in September last year, when the difference was at a four year low of 46%. Parts of the north are now being left behind, as stretched affordability has limited sellers’ ability to increase prices in most regions.” (Rightmove's House Price Index)
Real first-time struggling to get on the housing ladder
Older home buyers returning to the market may be masking the fall in the number of “true” first-time buyers (FTB) getting onto the housing ladder, according to research published by Nationwide. The research revealed that although FTBs still account for around 40% of house purchases, only 20% of young adults aged 20-24 were home owners. compared to around 30% a decade earlier. The headline FTB figures are likely to be artificially boosted by “a significant proportion of buyers returning to the market, perhaps after a spell in rented accommodation or moving from dissolving households.” The research also found that deposits and income multiples are a bigger constraint to getting on the housing ladder for “true” FTBs than debt servicing costs. Less than 10% of 22-29 year olds can overcome lending income multiple constraints. (Nationwide Affordability Report)
Other News
Call for larger affordable homes in London
There is a shortage of family sized affordable homes in London, according to a report “Size Matters” by the London Assembly's Planning & Spatial Committee. The shortage of three and four bedroom homes was described as “chronic”, particularly in the social rented sector. The report gave qualified support to the idea that family homes can be built at high density, citing success in Camden and Islington: “Well designed high density housing, with reasonable space standards and good facilities can be an effective way of providing affordable housing, but it needs close monitoring.” (Link to Assembly's Report)
GOSE assesses viability of different paths for housing growth…
The Government Office of the South East (GOSE) published a report written by Roger Tym and Partners looking into alternative growth scenarios and their impact on the region. The scenarios investigated were all for higher levels of housing growth than the 28,900 per annum put forward by the Regional Assembly in its Regional Plan, and were based on varying demographic and economic based projections. The report found that Central Oxfordshire, Kent Thames Gateway, Milton Keynes, the Aylesbury Vale and South Hampshire offer the most potential for additional growth. There is some potential for growth in East Kent/Ashford and limited potential in the Western Corridor, with the Thames Basin Heaths acting as a constraint. There is least potential for growth around Gatwick, the London fringe and the Sussex Coast sub regions. (Full Report)
… while SEERA slams the report
The South East of England Regional Assembly slated the GOSE report, claiming it was based on “unproven fantasy figures”. Assembly Chairman Cllr Keith Mitchell said: “These figures are pure fantasy. There is no clear evidence base behind the figures or the way they have been allocated across the region. In contrast, we have devoted more than two years to ensuring our own plans are practical and deliverable, balancing the need for homes with environmental concerns and ensuring a high quality of life. Strong technical work and the country’s largest regional planning consultation mean we have built a high degree of consensus behind the South East Plan - it is disingenuous of the Government to try to counter our democratic decision because they do not agree with it.” (SEERA Press Release)
Health and Education targets will not be achieved without housing
A survey of Chartered Institute of Housing members found that 92% of housing professionals do not believe that the Government’s targets to improve the nation’s health and education will be achieved without better quality housing for the most disadvantaged. The survey also found that 95% believe that homelessness and overcrowding will get worse unless there is a “major increase in the supply of affordable homes”. (Chartered Institute of Housing Press Release)
Immigration and the shortage of housing
A report published by Migrationwatch claimed that immigration is the principal cause of the current housing shortage. The report says that higher immigration has not been factored into the house building programme until recently and has exacerbated housing shortages. The organisation is extremely critical of the Government’s immigration policy, claiming the consequences have not been properly considered. (Migrationwatch Press Release)
The Conservatives commented on the report with Shadow Home Secretary David Davies saying: “This shows the consequences – which could be felt for a generation – of Labour’s wholly uncontrolled immigration policy. For immigration to act as a benefit to the nation, it is vital the Government carry it out in a controlled manner taking into account its impact on housing and public services.” (Conservative Press Release)
Consultation/Key Publication Dates
Code for Sustainable Homes Implementation Autumn
Home Information Packs (HIPs) Revised Regulations published 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 Graduates Conference 12 July
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
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