A weekly news summary covering all aspects of the house building industry from Pierre Williams, available to members only.
Bank of England Warns of Possible Price Crash
The Bank of England has issued its starkest warning yet that rising levels of consumer debt could spark a house price crash. Mervyn King, the Banks new governor, used his first big public appearance to warn that households with large debts were vulnerable to a decline in real incomes as increased taxes started to bite. He also said that homeowners were mistaken to assume inflation would erode the real value of their mortgage debts as it had for their parents generation. Thats not going to happen, he said. (Times, Mail)
Housing Market Rally: But For How Long?
Upbeat trading comments by estate agency group Countrywide belie a 40% slump in profits for the first half of the year. The group said trading had been particularly difficult throughout the Iraq war period but, like other agents, insisted that a strong market rebound is happening now. (All media)
Woolwich Says Prices Have Stalled
House prices have stalled according to the latest survey by the Woolwich, although sales volumes are on the up. However, prices in Londons most expensive areas have fallen by up to 17% with the average Westminster home now at 506,000 compared to 611,000 a year ago. Camden and Hampstead have seen similar falls.
The opposite has happened in the cheapest areas with Newham having seen rises of 20%. (All media)
RICS Joins Calls for Supply Increase
Following last weeks calls by the CML and Halifax, the Rics has called for an increase in housing supply, saying that many Britons have been relegated to a growing housing underclass through their inability to get a foot on the housing ladder. It says the government needs to provide more subsidy to increase affordable housing provision and it further recommends allowing more housebuilding in rural areas and reform of tax rules to encourage construction. Of the housebuilding industry, it said: It is ultimately accountable to shareholders and it is hardly surprising that it does not prioritise what it views as building for the public good. (Guardian, BBC, Standard)
Long-Term Fixed Rate Mortgages Unlikely
In order to achieve housing market stability, the Chancellor, in addition to increasing housing supply, hoped to encourage the take up of American style long-term, fixed-rate mortgages. But a new study suggests Gordon Brown would have to borrow 150 billion to invest into gilt-edge markets to make this happen. This would be necessary to allow borrowers to benefit from fixed-rate mortgages with the option of re-mortgaging at any time without penalty. (Sunday Business)
Mixed-Use Development Provides Better Returns
FPD Savills claims that, contrary to industry opinion, mixed-use developments deliver better returns than schemes restricted to one type of use. New research indicates that mixed-use outperformed single-use commercial schemes by 1.5% to 2% per year between 1998 and 2002. The research, which also confirmed waterside locations increased investment values of both commercial and residential property, will provide a boost to the current government policy. (Times)
Unexpected Inflation Rise Dents Rate Cut Hope
Hopes of a further cut in interest rates have been dealt a blow with an unexpected rise in inflation. The headline rate rose to 3.2% from 2.9% in June. The rise wrong-footed city analysts who expected inflation to ease allowing for a cut in interest rates. (All media)
Buy-to-Let Margins Fall
The profit margin on buy-to-let has fallen to lowest level for at least two years according to a new survey. Although the cost of the average buy-to-let home is 20% higher than a year ago, rental yields are increasing at less than the current rate of inflation. Annual yields are now 7.5%. However, with the number of first time buyers diminishing, rental values are expected to stabilise soon or start increasing once more. (Independent)
Prescott to Stay Another Full Term
John Prescott has announced he will stay on for another full term of Government, if elected. As the minister in charge of housing and a strong advocate of the need for more new housing, Mr Prescott says he still gets a buzz out of his job. His comments counter earlier strong speculation that he would be retiring at the next General Election. (Times, BBC)
Recruitment Drive Costs 29,000 Per Job
A 5m scheme to attract more people into construction managed to attract just 171 recruits - at a cost of 29,000 each. The failure of the governments Ambition: Construction scheme has cast doubt on its ability to meet its promise of building more new homes. Opposition parties said the cost of hiring skilled tradesmen would continue escalating unless the government did more to attract more recruits. (Independent)
Redrow Pushes Steel Frame
Redrow is to expand its use of steel frame, citing a 30% saving in construction time and improved quality control. In an exclusive interview for the FT, Chief Executive Paul Pedley highlighted other advantages of steel-frame - a saving on wall thickness that delivers the equivalent extra space of an en-suite bathroom on the average three-bedroom house. With increasing pressure for more housebuilding and a skills shortage that looks increasingly unlikely ever to be solved, the future of steel and timber frame looks more secure than ever. (FT)
London and South East Population Set to Surge
Net immigration into Britain is higher than it has ever been at an official 172,000 per year and is set to continue rising. London is expected to take 120,000 of these. In the mid 1990s 30,000 work permits were issued each year but by 2002 this had increased to 137,000. Partly as a result of this, the Government is to order the first ever study with a view to adopting a population policy for the country. The UN says Britain has the fastest growing population of any large country in Europe and projections now indicate a total population of 66 million in 2050 compared to 59 million now. (Economist, Times)
Crest Benefits From Heron Interest
Speculation that Heron International is considering bidding for Crest Nicholson boosted the housebuilders share price. Shares ended 15.5p higher at 309p as investors bet that Heron, which already has a 3.3% stake in the company, would use this as a platform to launch a bid for the company. Berkeley also improved 25.5p to 842p after Dutch bank ABN Amro made encouraging comments about the company following robust trading statements from Tony Pidgley. (Guardian)