A weekly news summary covering all aspects of the house building industry from Pierre Williams, HBF's Head of Media, available to members only.
Treasury to launch Property Trusts
The Treasury is preparing to launch tax-friendly property trusts in a new effort to achieve housing market stability. The trusts would encourage institutions to invest in rental accommodation and are based on the successful US real estate investment trusts (reits). Their introduction is thought to feature prominently in the Barker review on housing supply due for publication next week. Such a system would reduce the cost of capital for residential investment and expand the supply of rental property. The Treasury said: “The government has been in discussions with the property industry regarding the feasibility of property-investment trusts”. (Sunday Telegraph, FT, Independent)
Barker and Land Development Tax
Debate continues on what recommendations will be made in the Barker review on housing undersupply. Perhaps the most important is that of a tax on land banks. This has been the subject of much speculation and is based on the claim that major housebuilders’ are hoarding land. Although the reality is very different, land banks have increased to approximately 3.7 years’ supply. Whether this is seen as “hoarding” by Barker remains to be seen, as does any intention to penalise the industry for doing so. However, Barker’s public comments to date suggest she sees a need for housebuilders to hold land. She told Housebuilder magazine: “It is clear why as a builder you would need to hold onto land because of the time it takes to get planning permission.” Whether her final report is equally supportive of housebuilders’ views, remains to be seen.
HBF Note: The press is clearly on the housebuilders side on this issue. In editorials, The FT says building up landbanks might be a prudent business strategy for developers given the delays in getting planning permissions. It concludes that ”the government would do better to focus on easing the planning process so that land shortage ceases to be a constraint.” The Guardian is even more forthright, saying taxing land banks should be a “non-starter”. However, it concludes that because its introduction would inevitably result in failure and produce a “terrific bureaucratic headache”, it “must be a Treasury favourite”. (FT, Guardian)
HBF attended a private Kate Barker seminar last week in which it was hoped some information on the report might be forthcoming. However, Ms Barker refused to give any hint as to what her report might say about such a tax.
Mortgage Lending Hits New Record
The latest Bank of England figures show mortgage lending in October reached a record £9.47bn - compared to £9.02bn the previous month. However, consumer borrowing slowed to £1.23bn from £1.8bn over the same period. This suggests borrowers are switching their short term debts onto their mortgages to save money. Nevertheless, the figures put extra pressure on the Bank to increase rates although most economists believe it will keep rates steady until at least February. (All media)
Nationwide Confirms Price Rise...
The latest from the Nationwide says prices increased 1.2% in November. This was down from October’s 2% rise and brought annual inflation down from 16.1% to 15.2%. But the building society said last month’s rise was still strong and indicated the market remained buoyant despite the rising number of market pessimists. It is sticking to its forecast of a 9% hike in average prices next year. (All media)
…And Paragon Dismisses Buy-to-Let Fears…
Paragon, the specialist mortgage lender with 10% of the buy-to-let market, has dismissed suggestions that this area of the property market is overheating. The lender said total advances in the year had increased 49% and Chief Executive Nigel Terrington claimed soaring prices were underpinning the rental market. He said: “First time buyers have fallen to their lowest level since 1969 and rent increases were 8.5% in the past year, whilst in London rental yields have risen in the last three months.” (FT, Guardian)
…But Capital Economics Continues Talk of Doom
The firm Capital Economics has repeated its claims that the housing market is certain to fall, this time saying up to 300,000 will be hit by negative equity as prices drop by 20% over the next three years. The firm’s managing director, Roger Bootle, believes the fall is inevitable as prices are forced back into line with wages. He believes up to 40% of those buying in 2004 will face negative equity, with the southeast and London the worst affected. However, the firm also says the subsequent bounce back would be strong with a 12% rise in prices between 2007 and 2010. (Mail, Express)
Churches Unite to Condemn Housing Problem
The Archbishop of Canterbury has challenged the morality of the housing market, arguing that it is “divorced” from people’s needs and has left key workers struggling. During a sermon on the issue, Dr Rowan Williams called on senior church figures to speak out about the problems. He said: “We live in an environment where there is, or seems to be, an immense gulf between the needs of ordinary people for a stable background that helps them to be human and the way in which the property market operates.” Dr Williams’ comments have now been echoed by the Archbishop of Westminster who said: “Home is the place where we build our families and find the space to develop alongside friends and loved ones. To be deprived of such a basic necessity is to feel less than human.” (Times)
Lambeth Blocks St George Tower
St George’s plans to build the UK’s highest residential tower have been rejected by Lambeth Council. The council’s planning committee voted by three votes to four against the 49-storey tower, despite it having Ken Livingstone’s approval. St George Managing Director, Tony Carey, said his company would appeal and hit out at the council’s liberal-led administration. He said: “Mr Livingstone supports this very strongly. Lambeth, which is Liberal, doesn’t. Funny that. We’re in among politics here.” (Independent)
Lenders May be Forced to Reveal True Mortgage Costs
Mortgage lenders may be compelled to reveal more detail to borrowers about the cost of long-term borrowing if the Treasury heeds the findings of the report it commissioned into lending and the housing market. Prof David Miles’ report, being run in conjunction with the Barker Review on housing supply, is expected to encourage Government to force lenders into being much more open about their practices so borrowers can easily compare the deals being offered. This is turn is being seen as a way of increasing the supply of long-term fixed rate deals that the Chancellor wants. (FT)
Countryside Admits Land Sales Drive Profits
Announcing 5% rise in pre-tax profits for the year, Countryside Properties admitted its results stemmed more from land, rather than house sales. Chief Executive Graham Cherry said the group concentrated on what it was good at - taking land through the planning system. The FT commented that long-term investors were keen on Countryside - despite its moderate performance - because its reputation for sustainable development made it popular with planning authorities. (FT)