A weekly news summary covering all aspects of the housebuilding industry from Pierre Williams, HBF's head of media, available to members only.
Bank Holds Rates For Now
The Bank of Englands Monetary Policy Committee has decided to leave interest rates unchanged at 4.5% to allow more time to see whether its recent series of quarter-point increases have had the desired effect of calming down the housing market. This was a widely expected move following calls from industry that the market has cooled. However, the move might well be temporary with most analysts expecting further rises ahead perhaps as soon as next month. The build up to this is explained in the following items. (All media)
Barratt and Bovis Tells Bank to Freeze Rates
Barratt and Bovis chief executives, David Pretty and Malcolm Harris have joined the expanding chorus of housebuilders telling the Bank of England that its series of quarter-point interest rate rises has worked in cooling the market. Now is the time to leave base rates at 4.5% to maximise the chances of market stability. The recent rate rises have already started working, said Pretty. Harris said: They have calmed the market down. It was starting to overheat in the first four months of the year but has moved back to more normal levels. Both firms have produced solid trading figures suggesting stable growth is on the cards. (All media)
HBF Note: The timing and scale of interest rate rises has been critical. No one has been better placed to give the Bank of England up-to-the-minute information on market conditions than the housebuilding industry. And, even if it seems to some that Mervyn King was both excessive in his warnings about the future of the market and perhaps a little slow in picking up on what our industry was telling him, it appears the message has got through. However, this message will need to be repeated as the MPC wrestles with setting rates correctly for both the housing market and wider economic conditions.
Eddie George Says Enough
Along with housebuilding bosses, retired Bank of England Governor Sir Eddie George has also said that recent rate rises appear to have done their work in calming the market. He is also more confident that the market will remain healthy: The most desirable outcome and the one I think will happen is that the rate of increase will slow rather than that prices will fall, he said. The FT devotes a whole page to the global phenomenon of rising house prices and by examining what has happened in other countries, concludes that stability in the UK market is still more likely than a crash.
HBF to Launch Price Index?
Keen to demonstrate that house price rises are under control and certainly more moderate than suggested by some lenders indices, HBF is examining the possibility of producing its own price index. The plan is to produce a prototype in the near future and consider the merits of a regular index. (Times)
But PwC and Merill Lynch Predict Gloom
Hopes of stability havent convinced economists at PricewaterhouseCoopers who believe prices are heading for a steady downward trend reaching 10-15% over the next five years. It justifies its stance on a belief that buy-to-let investors will start selling off their portfolios as their capital growth returns start to dwindle. Stockbroker Merrill Lynch paints a similar picture, suggesting the market is set for a long period of stagnation but not a crash. (All media)
Housing Corporations Lost Vision
Social housing policy has lost its way according to an influential select committee of MPs. The Housing Corporation has been swamped with delivering on huge numbers of government initiatives rather than on delivering housing and needs to re-focus on being a tough regulator to reward effective housing associations and penalise those that fail. But the committee also called for a re-think on plans to offer social housing grant to housebuilders, saying this could lead to confusion and duplication between the Corporation and English Partnerships. (Trade Press)
HBF Note: That social housing policy lacks clarity is obvious to anyone with even a cursory interest in housing. The vast number of bodies involved in and created for this sector is undoubtedly a major factor, as are the ever-changing and increasingly numerous government initiatives invented to sort it out. Whats clear is that the public sector has by itself done a splendid job of creating this fog of confusion. To suggest that the one real hope of salvation involving the private sector will cause yet more confusion, is illogical. If the government is serious about achieving both delivery and value for money, then it knows where to turn. This would also tie in perfectly with the industrys desire to keep margins up in a weakening market by boosting volumes.
Crest Cautious but not Gloomy
Crest Nicholson CEO John Callcutt is cautious but not gloomy about housing market prospects. The company is expecting to increase sales volumes by 30% this year and by a further 10% next year. This reflects the companys move to lower cost housing in the South East where affordability and the shortage of low-cost housing is most acute. Callcutts comments came on the back of a reported pre-tax profit of 36m for the first six months to April 30 up from 32m last time and ahead of analysts estimates. (FT) The FT comments favourably on Crests strategy saying its shift away from the luxury end of the market has been well-timed and that its healthy land bank will help if times get tough.
Taywood and Galliford Try Shrug Off Market Fears
Taywood CEO Iain Napier has dismissed fears of a crash, forecasting the house price rises will come down to a sustainable 4-5%. The company is on course to meet its full-year targets with 75% of forecast sales already reserved compared to 64% at the same time last year. This suggests full-year results are expected to be at the upper end of analysts forecasts. The company is also looking out for acquisitions as housing undersupply points to buoyant trading ahead in terms of units. Galliford Try is also looking good with the firm completing 761 homes at an average selling price of 220,000. (Telegraph, FT, Times)
Population Growth to 60 Million
The UKs population has reached almost 60 million according to the Office of National Statistics. This represents a rise of 1.7m during the past decade and the forecast is now for a total of 64.8m in 2031. In another development, government has admitted failing to count more than 100,000 people in the 2001 census.
HBF Note: This matters because a cornerstone of anti-development lobbying has been on claims that official figures have painted an inaccurate picture of the population and hence household growth. These upwardly revised figures suggest household growth will continue in line or above official forecasts.