A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
Economic News
Retail sales gain momentum…
Retail sales growth picked up in September, with a balance of 14% of retailers reporting that sales rose in comparison to a year ago, according to the Confederation of British Industry’s (CBI) Distributive Trades Survey (DTS). This is the largest balance to report an increase since December 2004.
Chairman of the DTS Panel, John Longworth, said: “Six months of growth is good news for retailers and reflects continuing consumer confidence. The still lively housing market means consumers are putting their money into larger items, such as furniture, carpets and TVs. But sales growth in September was driven by a few key sectors and achieved in the shadow of some darker clouds gathering on the horizon. The rise in inflation is set to continue, making the prospect of a further hike in interest rates very real.” (CBI October Distributive Trades Survey)
… as economic growth is revised down
Economic growth in the second quarter was revised down from 0.8% to 0.7%, although the annual increase from the second quarter of 2005 was unchanged at 2.6%, according to the Office of National Statistics. A breakdown of Gross Domestic Product reveals that the services industry expanded by 0.9% in the quarter, construction output rose by 0.5% while output in the production industries was unchanged (although manufacturing output expanded by 0.7%). (Second Quarter National Accounts)
Political News
Housing shortage highlighted at Labour Party Conference
Housing Minister Yvette Cooper emphasised her desire to see more homes built at fringe meetings at the Labour Party Conference. In a meeting “Building hope – Decent homes in decent neighbourhoods”, organised by Shelter and Labour Housing, Ms Cooper stressed the need to build more homes to avert a future crisis, highlighting that although 170,000 homes were built last year, 200,000 new households were formed and she accused the Conservatives of taking a “Dr Seuss approach to housing”. On second homes and housing in rural communities, Ms Cooper said that people buying second homes was not a big problem but the view in these communities that more homes should not be built is.
In a fringe meeting “Changing Places: Delivering Housing Fit for the 21st Century”, Ms Cooper reiterated the issue of household growth exceeding the rate at which new homes are being built. She also argued that it is important to build homes to high environmental standards, moving towards low carbon and carbon-neutral developments.”
Conservatives highlight Labour divisions on PGS
The Conservatives highlighted the dispute between the Treasury-backed plans for a Planning-gain Supplement (PGS) and the Labour run Scottish Executive. Scottish Ministers claimed the tax is misconceived and will act as a disincentive for regeneration.
Shadow Minister for Housing and Planning Michael Gove said: “Labour Ministers in Scotland are right to warn that Gordon Brown’s tax plans are economically flawed. Conservatives welcome this cross-party support in opposing this new tax. The danger is that Brown’s land tax will jeopardise vital regeneration projects in areas where it is desperately needed, force up the cost of new homes and hinder the building of the new houses that we need.” (Conservatives Website)
Corporate News
Profits rise at Barratt
Barratt Developments reported that underlying pre-tax profit rose to £391.4m in the twelve months to 30 June, up 3.4% in comparison to the preceding three months on turnover of £2,431.4m. The company completed 14,601 homes, 1.7% more than a year earlier. The landbank was increased by 9.0% to 66,500 plots. The statement accompanying the report confirmed that Chief Executive David Pretty will retire from the company after Christmas, with Mark Clare to take over as Chief Executive on 2 October.
Mr Pretty gave an upbeat view of the market: “The fundamentals of the housing market remain sound, with good buyer confidence, a benign interest rate environment and good employment levels. These are underpinned by severely restricted supply of housing across the country caused by constant planning delays. There is an enormous need for new homes and every year that this demand remains unsatisfied, pent up demand increases.” (Barratt Developments Results)
Housing Market
House prices rise in September
House prices rose by a seasonally adjusted 1.3% in September as the annual rate of growth rose to 8.2%, up from 6.6% in August according to Nationwide. Group Economist Fionnuala Earley pointed out that it is still cheaper to buy rather than rent under some circumstances: “A comparison of the cost of servicing a mortgage loan against rental costs for similar properties shows that it can still be cheaper to buy than to rent at current mortgage rates, but usually only on an interest only basis. The typical loan-to-value ratio for a first-time-buyer is 90%. Based on this, mortgage rates would need to increase to around 7% before monthly outgoings on a mortgage exceed rent. However, if the comparison is made on a repayment basis the situation is quite different and debt servicing costs are generally higher than rent, even at current mortgage rates.” (Nationwide September House Price Index)
Mortgage lending remains strong
The number of mortgage approvals remained strong in August at a seasonally adjusted 119,000, a slight fall from 120,000 the previous month, according to the Bank of England. This was up 14.4% in comparison to the same month last year and approvals in the first eight months of 2006 were 24.1% higher than the first eight months of 2005. (Bank of England Press Release)
Other News
Slight improvement in processing planning decisions
The share of planning applications for major residential developments (classified as over 10 units) decided within 13 weeks of submission rose slightly in the second quarter to 67%, up from 64% in the preceding quarter and the third successive quarter that has seen a rise, according to the Department for Communities and Local Government. However the share of decisions made within 8 weeks remained unchanged at 13%, equalling the record low seen in each of the three preceding quarters.
65% of applications were granted planning permission, an unchanged rate from the preceding quarter, which is a record low for data going back to 1992. (Second Quarter Planning Statistics)
One in ten towns has an average house price above IHT threshold
Research from Halifax reveals that 10% of towns now have an average house price above the inheritance tax threshold (IHT) of £285,000, an increase from 4% five years ago. The research found 48 of 482 English towns surveyed now fell into this category, 46 of which were in the south of the country. An estimated 1.4 million homes are currently valued at above the threshold, a figure that is projected to rise to 3.5 million (20% of homes) by 2020 if the IHT threshold is only increased in line with retail price inflation.
The Halifax concluded that failure to index-link IHT with house price inflation will see a continual rise in the number of properties becoming liable for the tax, calling for a rise in the threshold to £430,000 to allow for house price inflation over the last 10 years, which would be expected to cost the Exchequer around £1 bn in lost revenue per year. (HBOS Press Release)
HBF Events
Leap in housing applications continues to slow UK supply
Housebuilders are increasingly being forced to apply twice, three times or even more for planning consent on residential schemes - slowing the supply of new homes in the UK at a time when the government is trying to speed the process up. New research shows that the number of schemes needing multiple planning applications to secure consent has doubled in the past two years. Around 33% of schemes now require more than one application before they are given the go-ahead – twice as many as in 2004. Triple applications now account for 8% of schemes, up from just 2.3% in 2002.
The stark figures have been uncovered by research undertaken for the Housing Market Intelligence report, which has revealed that the situation is particularly acute in the South East, where fewer than 55% of applications are given the green light on the first attempt.
The full results of the research appear in the Housing Market Intelligence 2006 report, which will be launched at the fourth annual HMI conference at London’s Business Design Centre on October 10.
Chance to inform the DCLG’s policy direction at Housebuilding 2006
The Department for Communities and Local Government is giving developers the chance to discuss the latest housing and planning policies directly with DCLG representatives at the Housebuilding 2006 exhibition.
The DCLG has extended an open invitation to housebuilders to come onto its stand M37 on October 10 and 11, to find out more about its future policy direction and raise any concerns about current issues.
HBF Technical Conference 2006: Codes and Regs – The Way Forward
9 November 2006 - Nottingham Belfry Hotel, Nottingham
For those not attending Housebuilding 2006, the HBF Technical conference offers the opportunity to catch up on the technical issues of the moment. This parallel conference will be once again looking at the hot topics of the Code for Sustainable Homes and Building Regulations, and will address any further developments since HB06.
Current speakers are included from the following organisations: DCLG, LABC, HBF, Robust Details ltd.
For further information please contact events@hbmedia.co.uk or 020 7960 1646. To register your place on-line visit www.hbmedia.co.uk
Consultation/Key Publication Dates
Code for Sustainable Homes Implementation Early 2007
Home Information Packs (HIPs) Revised regulations 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
Housing and planning incentives To 17 October
Planning and Pollution Control Consultation Closes 6 December
Part B of Building Regs – Document Autumn
Implementation April 2007
Water Regulations Consultation Document Autumn
HBF Events
HBF Annual Planning Conference 14 September
Housing Market Intelligence 2006 10 October
Housebuilding 2006
Business Design Centre, London N1 10 &11 October 2006
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
Housebuilding 2006
10 and 11 October 2006, Business Design Centre, London N1
Now in its third year the exhibition, housing market intelligence conference, management conference programme, free briefings and the Housebuilding Innovation Awards bring together all that is new in the housebuilding industry.
Visit www.housebuilding2006.com for more information.
Pre-register today to be entered in to a prize draw to win two trips to the Ashes Down Under (match tickets, flights and accommodation)