A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
HBF News and Activity
HBF Barker Conference Filling Up
Places are rapidly filling up following the announcement that David Miliband will address HBF’s major Barker Conference in London on 23rd February (9.30-16.00). An early booking is recommended to avoid missing out. Other speakers will include Kate Barker, Professor Sir Peter Hall and James Paton, HM Treasury.
To book a place please contact the Events team on 020 7960 1646 or email.
HBF Meeting with Treasury & No.10
Delivery UnitHBF organised a City briefing on Tuesday 24 January for senior officials at HM Treasury and the No.10 Delivery Units. More than 30 officials attended the meeting. John Messenger, Executive Director from Morgan Stanley, gave a presentation on how the house building industry operates and its relationship with the City. This was followed by a lengthy discussion. HBF was represented by Stewart Baseley, HBF Executive Chairman, David Pretty, Chief Executive of Barratt, Paul Pedley, Deputy Chairman of Redrow, and John Stewart, HBF Director of Economic Affairs. The briefing was part of HBF's ongoing efforts to increase Government understanding of the industry.
HBF Conference Success
HBF's conference on the PPS3 and Planning-gain Supplement consultations on 26 January 2006 was one of the most successful events ever held. More than 100 delegates heard expert speakers from the ODPM and Treasury, the private sector and a local authority. They also participated in a series of workshops. Valuable feedback from HBF members and other delegates at the conference, and especially the workshops, will inform HBF's responses to the two consultations.
Economic News
Economic growth accelerates
The economy grew by 0.6% in the fourth quarter of 2005 compared to the previous quarter, meaning that Gross Domestic Product growth for 2005 as a whole came in at 1.8%, according to the preliminary estimate published by the Office for National Statistics. The fourth quarter saw the fastest quarterly expansion in 2005. The acceleration was led by the services sector, which grew by 0.9%, and in particular output within distribution, hotels and restaurants (1.2%), transport, storage and communication (1.1%) and business services and finance (1.1%). (Fourth Quarter GDP release)
No change in MPC voting pattern
The minutes of the Monetary Policy Committee meeting on 11/12 January revealed that the vote was identical to December, with 8 members of the Committee voting for no change and Stephen Nickell once again favouring a 25 basis point cut. The minutes show that the MPC expects growth to be broadly in line with the historic average over the coming quarters and that: “There was probably some spare capacity in the economy following the period of below-trend growth and this might be expected to put downward pressure on future inflation.” However, “in the short-term, upside risks to inflation from higher oil and gas prices remained.” (MPC Minutes)
ITEM club expects pick up in growth in 2006 and 2007
The influential ITEM Club forecast that GDP growth will pick up to 2.3% this year and 3.0% in 2007. Employment incomes are forecast to grow steadily and inflation fall back, reviving real income growth. Interest rates are expected to be held at the current 4.50% for the foreseeable future. The Club highlight that: “Fears of taking on more debt would suggest that personal spending should track income closely over the medium term.”
The MPC’s interest rate dilemma was also noted: “With output below trend on most calculations and depressing inflation, growth must now move above trend if the inflation target is not to be seriously undershot. The latest indicators are that growth is picking up, but it may still prove necessary to make a further cut in interest rates to deliver this outcome.” (ITEM Club Winter Economic Outlook)
Political News
Barker Report II calls for evidence
The Government issued Kate Barker’s Review of Planning Policy and Procedures with its terms of reference, as the review called for evidence by 28 March. The terms of references were set out as:
1 - Assess the extent to which the Government’s sustainable economic development objectives are reflected in planning policies and procedures and how far the desired outcomes are achieved, in the context of the long-term trends of globalisation, demographic pressures, environmental change and the consumption of natural resources;
2 - Establish the causes behind any shortcomings identified; and
3 - Make recommendations both for making the recent reforms work more effectively and for further reform, building on those already in place, to enable more efficient, effective and integrated delivery of economic, environmental and social goals. (Barker Review call for evidence)
HBF Comment: This review has a much wider scope that Kate Barker’s Review of Housing Supply, but will provide a further opportunity to focus on issues about delivery through the planning system.
Commons Select Committee Response to Pre-Budget
ReportThe Commons Treasury Select Committee published its response to the Chancellor’s Pre Budget Report, including a comment on the proposed Planning-gain Supplement (PGS).
The Committee concluded: “We welcome the Government's announcement that they are to consult on the introduction of PGS, which should help to deliver the necessary new housing growth in a sustainable fashion. We trust that the Treasury will ensure that it consults fully and appropriately on the proposals, to ensure that the optimum balance is struck between raising revenues to improve local infrastructure, whilst not deterring landowners from selling their land for housing development or compromising appropriate planning safeguards. In particular, we expect the Treasury to give full consideration to applying lower rates (or a total exemption) for PGS applied to brownfield sites. We also consider that, regardless of the eventual decision on introduction or design of the PGS, Government should continue to accord a high priority to securing improvements to the planning system, which currently inhibits the growth in housing supply necessary to keep house prices at an affordable level.” (Select Committee Report)
The Energy Review Consultation
Department of Trade and Industry published its consultation document on the Energy Review, inviting responses by 14 April. The document highlighted the four goals for policy on the issue; to put the UK on a path to cut CO2 emissions by 60% by around 2050, to maintain the reliability of energy supplies, to promote competitive markets at home and abroad to raise the rate of sustainable economic growth and improve productivity, and to ensure every home is adequately and affordably heated.
There was little housing specific detail in the document but it was noted that the Review will take into account the Barker Review of Land Use Planning and the ODPM’s Review of the Sustainability of Existing Buildings, which will consider measures that could be introduced to improve energy efficiency in the existing building stock. (Energy Review Consultation Document)
Company News
Barratt expect profits to rise
Barratt Developments announced that they expect “an improvement in pre-tax profits” in a trading statement issued ahead of the announcement of interim results for the second half of 2005, to be published on 29 March. Barratt made 7003 legal completions over the six month period, 2% more than in the same period a year earlier. This comprised of 5569 private completions (down 1%) and 1434 social housing completions (up 14%), and also increased the landbank 6% to 63,000 plots, which equates to 4.3 years’ supply at current volumes.
Commenting on the market, the statement said: “There have been positive signs in the past 3 months that buyer confidence has improved and recent sales rates have been encouraging… With the key Spring selling season still ahead of us, it is clearly too early to be sure of market trends for the rest of the financial year but, if recent improvements are sustained, we are currently on target to increase volumes." (Barratt Trading Statement)
Crest Nicholson meeting profit expectations
Crest Nicholson reported that they met analyst expectations for profits for their financial year ended 31 October 2005, in announcing preliminary results. Pre tax profit was reported at £81.3m, down 1% from the preceding twelve months, on turnover of £714.3m. Crest sold 1,865 homes on the open market, 3% more than in the preceding year, and 621 affordable housing units, down 13%. The short term housing landbank was little changed at 14,945 units, five years supply.
Commenting on the outlook, Chief Executive Stephen Stone said: “While it is too early to predict the outcome for 2006, early signs of an improving market, particularly in the South East, make us cautiously optimistic.” (Crest Nicholson Preliminary Announcement)
Housing Market
Steady house price growth in 2006
House prices are expected to grow by 4.4% in 2006, slightly slower than the 5.1% seen over 2005, according to the Centre for Economic Business Research’s (CEBR) Winter Quarterly Housing Forecasts. The CEBR commented: “Fundamentally, the UK does not build enough new homes to keep pace with rising and changing demand… The housing market - like all other markets - is a simple matter of supply and demand. Only when - or, more likely, if - there’s a step change in new housing construction will property cease to be an attractive asset.” (CEBR Press Release)
Other News
SEERA says yes to Planning-gain supplement
Local councils should have the power to collect the proposed planning gain supplement (PGS), said the South East England Regional Assembly. SEERA welcomed the introduction of the tax, at a joint meeting of the Executive and Regional Planning Committees, but want to ensure it is used for the benefit of local communities rather than the Treasury.
Councilor Keith Mitchell, chairman of the regional assembly, said: "Infrastructure funding to support growth in the south east has been inadequate for many years. The proposed PGS could provide greater consistency and more resources than current Section 106 agreements, especially in the south east. But we want to cut out the middleman: rather than the Treasury treating the levy as a new tax and passing a percentage back to local communities, the collection responsibility should be given to the local planning authorities themselves so that local councils have control and can channel the investment where it is needed."
He added: "The South East already makes the greatest net contribution to the Exchequer of any region. We have a buoyant development market, so this levy makes sense. But there must not be even the slightest risk of PGS being used to siphon off even more resources for investment elsewhere."
SEERA also said that design standards for sustainable homes should be made mandatory. (SEERA Website)
Rightmove valued at £400 million
Property website Rightmove is planning to float in the spring, in a move which analyst’s estimate will see the company valued at more £400 million. Rightmove is understood to be planning to offer shares to estate agents and developers.
The website is five years old and made half yearly profits of £3 million last year. Estate agency Countrywide has a 30% stake in the brand. (Financial Times)
NIESR calls for a 1% property tax levy
Dropping council tax in favour of a 1% tax on the value of property would bring the housing market back into better balance, according to think tank the National Institute of Economic and Social Research (NIESR). NIESR claim that the current regime gives favourable tax treatment to owner-occupiers and believes that house prices remain overvalued by approximately 20%.The Institute calculate that in 2004, this change to the tax regime would have raised £30bn, as opposed to the £20bn raised by the council tax.
NIESR director Martin Weale said: “The tax advantages of housing have been one of the things behind rapidly rising house prices. Higher prices don’t increase wealth, they just transfer it from those without to those who have housing. There is too much money going into housing - it would be better if there was a shift towards more productive investment.” (Financial Times, Guardian)
Consultation/Key Publication Dates
PPS3 Consultation: 5 December - 27 February
Planning-gain Supplement Consultation: 5 December - 27 February
Code for Sustainable Homes Consultation: 5 December - 6 March
Home Information Packs (HIPs) Consultation: Closed 6 December
HIPs Dry Run: Ongoing
HIPs Introduction: 1 June 2007
Barker Review of Land Use Planning: 25 January - 28 March
Energy Review Consultation: 25 January - 14 April
Lyons Enquiry into Local Government Consultation: Closes 13 March
Final Part L Publication: 5 April
HBF/HBM/NHMB Events
Barker Conference: 23 February
New Homes Week: 20 - 26 March
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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