A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
IMF downgrades forecasts for UK economy and calls on Chancellor to cut the fiscal deficit
In its biannual Global Economic Outlook, the International Monetary Fund (IMF) cut back its UK economic growth forecast for 2005 from 2.6% to 1.9%, citing slower public consumption growth, oil price increases and the slowing of the housing market. The IMF forecast that the economy will expand by 2.2% in 2006.
The IMF also sounded a warning to the Chancellor on the fiscal deficit: “With the IMF staff projections suggesting no improvement in the fiscal deficit in 2005 or 2006, fiscal consolidation remains necessary to ensure that the golden rule is met over the next cycle.”
(http://www.imf.org)
Political Events
Lyons enquiry extended and council tax revaluation postponed
The Government has extended Sir Michael Lyons’ inquiry into local government funding, so that he can consider issues relating to the wider functions of local government and its future role. In light of this, the revaluation of the council tax bands has been postponed. Commenting on his new remit, Sir Michael said: "One of the strongest conclusions emerging from my work to date is that well-founded recommendations on possible reforms to the funding of local government need to be based on a clear understanding of the expectations and responsibilities of local government, which continue to change. I welcome this extension to my remit, which has the potential to establish a new direction for how local government delivers and funds key public services."
(http://www.odpm.gov.uk)
Liberal Democrat Party conference
A number of discussions took place at fringe meetings at the Liberal Democrat party conference. Key comments included:
Lib Dem shadow Treasury Chief Secretary Chris Huhne proposed an alternative to the planning gain supplement recommended in the Barker review. Mr Huhne claimed that a fairer scheme would be to recoup the increased land value through reform of the business rates, basing them on site value rather than property value. This would remove the largest disincentive for developers to build on the land, he claimed. As developed land increased in value, the owners would pay a greater share of tax, but over a longer period than would be the case with a one-off windfall.
Mr Huhne also commented on the government’s plans to raise home ownership. Political judgement, Chris Huhne MP stated, was that despite polling evidence pointing to the contrary, home ownership was indeed a very widespread aspiration. It could be that home ownership was not about owning a house but rather about a desire for security and an asset for a rainy day. This was one of people's fundamental aspirations. This could be explained in economics by the concept of revealed preference, which states that people should not be judged by what they say but rather by their actions. The trend of homeownership suggested that the target of 1 million homeowners by 2010 could easily be achieved. However, he denounced almost all government schemes as cheap populism rather than an appropriate way of dealing with the legitimate aspirations of a large number of people. He called, in particular, for more action on the supply of housing rather and denounced the introduction of artificial home buying measures. The housing market, he added, has long been inelastic to demand for housing and it is time that this was addressed.
Shadow Secretary of State for the Environment and Rural Affairs, Norman Baker, claimed that greenbelt has increased many people’s quality of life. He pointed out that green belt lands had proved themselves sustainable and that they had enjoyed a high level of cross party support.
Simon Hughes MP identified the key areas for discussion as whether there are enough houses, whether the houses are good enough and whether houses are affordable. On planning policy, Mr Hughes identified the need for all communities to take responsibility for their housing needs. He criticised the 'not in my back yard' attitude, referring to the strong resistance for housing growth in some localities and reiterated the need for the creation of new local communities. He went on to argue that 'the south of the country may topple over' if investment continued to be concentrated in the south east and in particular London. Mr Hughes stated that better policies were needed to create communities where people didn't have to move to London for economic advancement. He said that he hoped for better shared and divergent opportunities.
New Chief Inspector of Construction at the Health and Safety Executive
Stephen Williams has been appointed Chief Inspector of Construction at the Health and Safety Executive (HSE). Commenting on the appointment, Mr Williams said: "I am delighted to be taking on this position at such a challenging time for the industry. The world will be focusing on our safety record during the construction of the 2012 Olympic sites and the revised Construction Design Management (CDM) regulations will mean new ways of working. My aim is to see an industry that gets health and safety right first time, right from the start, and with the right people involved. It is only by the industry showing leadership, working in partnership and taking ownership of the management of risk that improvements will be made. I look forward to working with the industry to achieve the challenging targets it agreed at the Construction Summit."
(http://www.hse.gov.uk)
Company News
Miller buys Fairclough Homes for £264m
The Miller Group announced that they have acquired Fairclough Homes from the Centex Corporation for £264m. Miller expect the integration of the two businesses to increase their operations to produce over 4000 homes a year, taking them into the top ten largest home builders in the UK.
Group Chief Executive Keith Miller commented: “We have monitored Fairclough Homes for some time and are delighted to have acquired the business. It is a good strategic and geographic fit with our existing businesses, and has a strong management team and an excellent landbank. There is a very positive macro economic outlook for UK housebuilding with growing household formation, high home ownership aspirations, a high level of employment, and low interest rates. Going forward, we expect the industry to experience further consolidation and we will continue to play a leading part in this process.”
(http://www.miller.co.uk)
Housing Market
CML report continued improvement in the mortgage market
The Council of Mortgage Lenders (CML) revealed that the pick up in mortgage demand continued in August, as number of loans for house purchase rose from 96,000 in July to an estimated 101,000 in August. However, this was still below the 110,000 in August last year. First-time buyers accounted for 30% of these loans. Gross mortgage lending rose by 9% to an estimated £27.5 billion in August, up from £25.2 billion in July. This was one of the highest figures on record, 4% higher than the £26.5 billion of August 2004, and the highest figure since July 2004.
CML Director General Michael Coogan said: "The doom-mongers' prophecies look to have been wrong, as the lending has continued to strengthen over the summer. Although the market remains far from spectacular in terms of transaction numbers and house prices, the prospects of a significant market correction are receding. The fact that the housing market is holding up is likely to be welcome news for the MPC, as it struggles to reconcile the very different pictures emerging from different sectors of the economy. We continue to expect a moderate market for the foreseeable future."
(http://www.cml.org.uk)
Rightmove report a fall in prices in August, but says that buyers are re-entering market
Rightmove reported a 0.4% fall in prices from 7 August to 10 September compared to the preceding month, leaving average asking prices up 1.6% on the same period a year earlier. However, Rightmove did note an upturn in activity “as buyers are tempted to return by realistic pricing.”
Miles Shipside, Commercial Director of Rightmove commented: “The market has been searching for a level of sustainable pricing at which sales volumes will begin to increase. Calling the bottom of the housing market cycle is a particular skill that successful property speculators have to exercise every time there is a recession in sales volumes or prices. There are now clear signs that some buyers see this as the time to re-enter the market. We could be at the bottom of this cycle of the property market, though continued realistic pricing is critical to keep the momentum going.”
(http://www.rightmove.co.uk)
Other News
OFT calls for better access and more competition for property searches
The Office of fair Trading (OFT) has called for more competition and better access in property information. The OFT wants the information held by local authorities in England and Wales to be more readily available to people buying and selling properties and to estate agents. The OFT found that the price of property searches varies from £55 to £268, “and it is likely that some customers are paying too much.” The provision of the information was described as being under “a complex framework of legislation” and “some local authorities restrict access by property buyers and their agents.”
(http://www.oft.gov.uk)
South East planning chief Mike Gwilliam resigns
South East planning chief Mike Gwilliam, who has been director of planning and transport at the South East England Regional Assembly (SEERA) since it was set up in 2000, will step down when the draft regional spatial strategy is submitted to the government next March.
Mr Gwilliam admitted that while he and his team have done well in putting together a strategy of which they can be proud, he found the process "frustrating" and "stressful". He added: "A little bit more realism from the government about what could be achieved would have made life easier." Mr. Gwilliam argued that Whitehall needs to demonstrate a greater understanding of the political pressures faced by regional planning bodies seeking to implement its growth agenda. He said that the government should instigate longer-term infrastructure investment to win voters over to its vision and voiced disappointment with delivery progress in the Thames Gateway growth area. (Planning)
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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