A weekly news summary covering all aspects of the housebuilding industry. Available to members only.
HBF News
HBF offers guidance on HIPs
HBF has issued a guidance note to members on Home Information Packs (HIPs), which are due to be introduced in June 2007. For the initial sale of newly-built homes (provided the home has a suitable warranty) there will be no requirement for a HIP to include a home condition report – roughly equivalent to a purchaser’s survey. The other information required for a HIP would, however, need to be provided by developers or their agents for the initial sale. (Full Briefing)
Economic News
Interest rates remain unchanged
The Bank of England’s Monetary Policy Committee left the repo rate unchanged at 4.50% at its June meeting, where it has remained since a 25 basis point cut last August. The decision had been widely expected by market commentators. (MPC Press Release)
Modest improvement seen on the high street
Retail sales in May were up 3.6% on a like-for-like basis in comparison to a weak May 2005, while total sales were up 6.2%, according to the British Retail Consortium (BRC). The BRC noted an improvement in the first half of the month before the cold wet second half damped sales. Sales of large TV’s picked up sharply ahead of the World Cup.
BRC Director General Kevin Hawkins commented: “A superficially encouraging result should be set against a weak comparative with May 2005. The modest improvement in sales reported by some retailers reflects continued discounting, and while certain products are now in demand in anticipation of the World Cup, others remain heavily dependent on price cuts. Consumer confidence remains fragile and an increase in interest rates is the last thing that either consumers or retailers need.” (BRC May Retail Sales Monitor)
Political News
Lord’s slate Government’s SE housing plans over water shortages…
The House of Lords’ Science and Technology Committee on water management in England and Wales attacked the Government’s plans for increased housing growth for not considering the full impact on water use, particularly in the South East. While the Committee welcomed “belated attempts to consider the likely impact of increased housing growth upon water use”, they “are completely unconvinced by the figures produced”. The Committee’s report recommended that the “Government consider making water companies statutory consultees on applications for developments comprising a number of properties that exceeds a given threshold.”
The report also raised concern that “the housing growth plans have not in many cases been factored in to the water companies’ long-term plans, due to the way in which the Government have initiated the planning.” The Committee expressed regret that the then ODPM “failed sufficiently to consult the water industry directly – or to give due consideration to the water management implications – when formulating the Sustainable Communities Plan and selecting growth areas”. It was recommended the DCLG and Defra work together in future to ensure consultation “is held at the earliest possible stage, rather than taking the supply of water for granted.” (Select Committee's Water Management Report)
… as the Conservatives go on the attack…
The Conservatives hit out at the Government after the report. Shadow Environment Secretary Peter Ainsworth said: “I don't know how John Prescott has the gall to lecture anyone about climate change .The Government seems to think that simply sticking the word 'sustainable' in front of its policies will make them compatible with the environment. Everyone, except Mr Prescott, is aware that the south east is suffering from water shortages. It is deeply irresponsible to build houses unless water efficiency comes as standard: it is as simple as that. Climate change is a reality, and it is time every department, not just DEFRA, woke up to the fact.” (Conservatives' Press Release)
… as do the Lib Dems..
The Liberal Democrats also attacked the Government with Housing Spokesman Dan Rogerson commenting: “The Thames Gateway redevelopment project is a vital part of solving the housing crisis in the South-East and is a valuable opportunity to develop truly sustainable communities. This level of miscommunication about something so important as water supply is shocking. This report comes at a time when many in the South are facing hosepipe bans. The Government must now review the Thames Gateway plans to ensure it is not only sustainable, but also that it will not negatively impact on the rest of the region’s infrastructure.” (Liberal Democrat Press Release)
… while the Government stands its ground
Housing and Planning Minister Yvette Cooper defended the plans, commenting: “We have a growing and ageing population. That means rising demand for water and for new homes as well. We need more homes to help first-time buyers and cut overcrowding but good planning means we can improve water efficiency at the same time. For example, Anglian Water has seen a 20% increase in the number of households since 1990 but no need to increase water supply due to conservation measures. That is why we are introducing tougher water efficiency standards for housing and are ensuring water companies and planners work together when deciding where new developments should take place.”
A DCLG spokesperson commented: “The Barker Review response was clear that demand for new water is projected to increase by 6.1% over a fifteen year period, as a result of a rising population and new homes. The Government looked at what additional water use would be needed to go further then the Sustainable Communities Plan and build additional homes in response to the Barker Review. Analysis and research found that building between 100,000 and 200,000 additional homes on top of current plans over the next 10 years would still only increase water use by around 0.1% more in 2016.” (DCLG Press Release)
HBF Comment: HBF responded to the Report, pointing out that building new homes could actually help solve the problem of water shortages.
Executive Chairman Stewart Baseley said: “It is crucial to recognise that houses do not use water – people do – and it is the people who are living and working in the South East now who need homes. We should also recognise that all new build homes have compulsory water metering and house builders are leading on the development and installation of new water-efficient fittings and features. We know that new stock is much more water efficient than old stock.
The Government’s latest household projections show that if the rate of house building remains the same, there will be a shortfall of 50,000 homes every year across the whole of England. The South East already faces the worst affordability crisis outside London and failure to meet housing demand will only further exacerbate existing social and economic problems. New measures of course must be taken to better manage water supplies in England and Wales. Building new homes – including the replacement of old stock - is part of the solution, not the problem.”
Chancellor says planning must be made more flexible and responsive
At a speech to the Confederation of British Industry President’s dinner on 5 June, Chancellor Gordon Brown said the planning system must be sped up. Mr Brown commented: “On planning, we have already legislated to make major changes. But in frankness, I believe we have much more to do. We must make our system quicker, more flexible and more responsive, and Kate Barker, in publishing the first stage of her review at the end of this month, will set out the challenges we still face - to which I can say we will rise. So working with you, we want to make major structural reforms in planning, regulation, science, education and infrastructure to equip ourselves for globalisation. And the Pre Budget Report will set out new measures in each of these areas following the Eddington and Leitch reports and reviews of our science base.” (Full Transcript of Chancellor's Speech)
DCLG consults on its role and structure
The newly formed Department for Communities and Local Government published a consultation document with proposals for the Department’s structure and ways of working. Stakeholders are to be involved in discussion during June, a decision on a new structure will be made in early July, a decision on a Director-General and Director-level appointments will be made by the end of July, detailed implementation will take place from July to September and the new structures will “go live” in September. (DCLG Consultation Document)
Cooper urges increase in use of microregeneration in PPS 22 review…
Speaking at a Town and Country Planning Association and Renewable Energy Association Conference, Housing and Planning Minister Yvette Cooper highlighted the Government’s Parliamentary Statement supporting Planning Policy Statement 22, which makes “clear Government’s expectations that all local authorities should set requirements for on site renewables in developments, and encouraging them to learn from other local authorities too on how far they can go.”
Ms Cooper also said: “We need to seize on new development as an opportunity not a threat. It is time to rethink the way we build. It is time to rethink the way we design our homes and communities, if we are to build communities for the future that are truly sustainable.” (Full text of Minister's Speech)
… as Conservatives say new energy products could benefit the economy
Speaking at the same Conference, Shadow Chancellor George Osbourne also stressed the need for environmentally friendly policies and cited the global market for new energy products and services as a “fantastic opportunity for British companies and the British economy”. Mr Osbourne said that the UK could benefit “by creating a stable tax and regulation framework that encourages the development and installation of new environmental technologies and by reforming the planning system and energy infrastructure to enable a wider uptake of micro-renewables.”
HBF comment: In response to the two speeches, HBF Executive Chairman Stewart Baseley said: “We welcome the growing public debate about how the development industry can most effectively move towards a lower carbon future. Viable local microgeneration and renewables schemes should be facilitated, but a multiplicity of different local policies would complicate industry's ability to innovate. The test must be what is appropriate on a site by site basis. This must include site viability and should be focused on delivery.”
Housing Market
House price growth eases in May
House prices rose by a seasonally adjusted 0.1% in May, according to the Halifax House Price Index. However, prices in the three months to May stood 9.1% higher than in the corresponding period a year earlier, the highest rate of annual price growth for 14 months.
Halifax noted that the recent acceleration in price growth may be easing, with Chief Economist Martin Ellis commenting: “There are signs that housing market activity may be beginning to level out. The pressures on the household sector resulting from higher unemployment and significantly higher household bills, together with the current high level of house prices in relation to earnings, are likely to constrain housing demand and curb house price growth and activity over the remainder of 2006.” (May Halifax House Price Index)
CML upgrades forecast for house price growth
The Council for Mortgage Lenders (CML) revised their forecast for house prices to the end of 2006 to be 7% higher than they were at the start of the year, up from a forecast of 2% growth made four months ago. Prices are expected to rise by 3% in 2007, a slightly higher rate than the 2% previously forecast. Consequently, they expect the Bank of England to increase the repo rate by 25 basis points to 4.75% by the end of this year, where it is expected to remain over 2007. The CML also revised upwards the forecast number of property sales in England and Wales this year from 0.97m to 1.2m. (CML Press Release)
Other News
Construction Industry needs 87,000 new recruits per year
The Construction Industry will need 348,000 more employees by 2010, an average of 87,000 new recruits a year, according a report published by ConstructionSkills. The report found that construction growth is forecast to shift from the North to the South and East of the country, largely due to a number of large projects, including the Olympics and Thames Gateway programmes. While the largest skill requirement is for 11,090 new recruits per year in wood trade skills, there is high demand for “white collar workers”, with the industry requiring over 36,400 per annum. (ConstructionSkills Press Release)
HBF Comment: HBF Executive Chairman Stewart Baseley commented on the report: “The home building sector recognises the overall challenge of meeting the labour and skills demand required to fulfil the UK’s construction needs. Independent research, commissioned by the HBF and CITB-ConstructionSkills, concludes that current skills shortages are unlikely to represent a barrier to expansion of the house building industry, showing that increased house building will actually facilitate greater efficiency and productivity.”
“In February, the HBF announced an industry-wide skills strategy to extend current initiatives across the industry, co-ordinate activity with partners and push for qualifications and training that are fit for purpose for home builders. The Major Home Builder Group is promoting the Construction Skills Certification Scheme with the aim of having a fully carded workforce by the end of 2007, and a fully qualified workforce by the end of 2010.” (HBF Press Release)
Funding granted for Rushenden relief road
The Government announced that £12m of Thames Gateway funding has been made available for the Rushenden Relief Road in Kent, which will link up the new Swale crossing. The scheme, which has been championed by the South East Regional Development Agency, will create over 2,000 new homes and 90,000 square feet of commercial floor space. (DCLG Press Release)
FT looks at land tax as the way forward
In an article in the Financial Times, Martin Wolf outlined the benefits of a land tax, which would raise revenue through taxing the increase in land value gained from the building of infrastructure. The article is based around a pamphlet by Fred Harrison, research director of the Land Research Trust, arguing the merits of privately funded infrastructure and pointing out that the building of London’s Jubilee Line cost £3.4bn, but raised prices in adjoining areas by close to £14bn. Mr Wolf concludes that “a land tax related to site value is the simplest way of extracting benefits from large scale investment”. He also observes that if local authorities were “deprived of the right to vary the rate, they would have an incentive to make investments that raise land values and increases their revenue”. (Financial Times)
Consultation/Key Publication Dates
Code for Sustainable Homes Implementation Autumn
Home Information Packs (HIPs) Consultation Closed 31 December
HIPs – 10 to 12 planned trials Autumn 2006
HIPs Introduction 1 June 2007
Housing and Regeneration Consultation Closed 19 May
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 and Meetings.
For details of HB Media events click here.
Paul Samter
Senior Analyst - Economic and Policy Affairs
Home Builders Federation
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