A weekly news summary covering all aspects of the house building industry from Pierre Willaims, available to members only.
Capital Gains Tax on First Homes?
Claims that the Chancellor is considering imposing Capital Gains Tax on the sale of principal residences have sparked an angry Treasury denial. The Sunday Telegraph, followed by all other media, ran a front page lead story claiming Treasury officials had held private discussions with tax consultants to see if and how homeowners could be levied tax bills of up to 40% on any profits made from the sale of their homes. Such a tax could raise £11bn a year - equivalent to four pence on the basic rate of income tax. This would be a very useful sum for a Chancellor who believes homeowners are “lightly taxed” and who is facing an ever-deepening hole in public finances. According to the Sunday Telegraph, consultants from Pricewaterhouse-Coopers confirmed the meetings with Treasury had taken place. One said: “The Treasury has told us it is actively planning the taxing of first homes. We know (the Chancellor) is looking especially closely at taxing people who make speculative short-term investments in the housing market.”
The Treasury has reacted with fury to the claims. A spokesman said the report was “unadulterated garbage”, whilst Pricewaterhouse-Coopers said: “We have a constructive working relationship with the Treasury but the idea we have had any confidential discussions with them on this issue is completely untrue.” Even stronger comments followed as the story took hold, with the Treasury adding: “Of course we are not going to do this, it would be completely crackers.” (Sunday Telegraph, all media)
HBF Note: Although it is difficult to establish how much truth there is in this, the prominence of the story itself highlights some interesting points: that such a move would be near-suicidal for the Government and that there is growing public awareness of the Chancellor’s habit of looking to the housing market to ease his financial woes. It could also be a strategic move to soften the blow of any further increases in Stamp Duty or other property taxes.
Shrinking Homes
Modern three-bed semis are a third smaller than their 1920s equivalents according to a survey by the DIY chain, Wickes. The average new home has 398sq ft less floorspace - from 1,291sq ft to 947sq ft. Ceiling heights are also down from 10ft to 8ft. The trend stems from two factors - demographic changes including the reduction in the size of households, couples having fewer children, marrying later, divorcing more often and living longer. The other factor is the drive towards higher-density living as a result of PPG3. (Mail, Express)
10 Years of Rising Interest Rates
A warning from the Bank of England about the increasing likelihood of a rise in interest rates, has been seized on by the media. The Express said rates would “rise for 10 years” after Governor Mervyn King warned of a “sharp correction” to the level of consumer spending - a risk exacerbated by the continued strength of the housing market and its associated borrowing.” Economists predict rates to rise to four per cent by the end of the year and top 4.5% by the end of 2004. (All media)
Prescott Calls for More Prefabrication
Mindful about increasing questions over delivery, John Prescott will today call for a new generation of prefabricated homes to solve the housing shortage. He will instruct English Partnerships to tender for hundreds of pod-like homes in “Millennium communities” He has also praised Westbury’s drive in off-site manufacture. Pierre Williams for HBF said the housebuilding industry would be even keener to invest if it could see some certainty in the planning system’s allowing it to deliver and so recoup its investment. (Times)
Prices Continue Rising…?
Asking prices have jumped 3.3% in October as buyers found themselves chasing a dwindling supply of homes, according to estate agents’ survey Rightmove. A spokesman said it was the sharpest rise for 18 months and demonstrates how an imbalance between supply and demand can produce rapid price changes in a short time. East Anglia saw the biggest rise of 6.5%, the North by 6.4% and London saw a rise of 4.5%. However, the longer-term trend is still slowing with the Government index of house prices putting annual inflation at 14% in the year to August - down from 14.6% at the end of July. (Times, Independent, Telegraph)
New Initiative for Key Workers
Key workers are to be offered subsidised mortgages worth up to £100,000 to help them move up the property ladder, extending the current Starter Homes Initiative - a similar scheme for first time buyers. The new scheme is likely to be limited to London and geared to helping workers who need larger homes in order to start a family. (Guardian, Standard)
Ministers Spark Second Homes Row
Immigration Minister Beverley Hughes has sparked a new row over second homes by buying a cottage in the Lake District - an area targeted for Government spending because of the shortage of homes for locals. Cumbria housing associations have recently received £11m of public funds to spend on affordable homes in the area after Prescott criticised the surge of second home ownership in the area. Hughes refused to comment, saying it was a “family matter”. (Sunday Times)
Planning Bill’s “Banquet for Barristers”
The Government’s “simplified planning system” is unlikely to be anything of the sort and will instead be a “banquet for barristers” according to the CPRE. The anti-development group is worried about the Bill’s intention to switch strategic planning decisions from councillors to unelected regional bodies and says the lack of rigorous detail required in local plans will be good news only for lawyers. (FT)
Bellway Booming
Bellway has announced record profits and a bulging order book. Full-year pre-tax profits are up 35% to £169m, turnover up 23% to £954m and dividend payouts up 27% to 20p. Finance Director Alistair Leitch said the company’s lack of exposure to central London had helped. He also said that although Bellway was considered to be a takeover target, any such approaches would not be welcome. Instead, he said the company wanted to “get on with delivering” and was on the lookout for regional acquisitions of its own. (Guardian, Independent, Mail, Times, FT, Times)
Gleeson Looks Solid
Gleeson is in good shape thanks to its housebuilding operations. Although the group’s construction arm took a hit on a cement plant project that went over schedule, the company’s fundamentals are in good shape with construction providing the cash needed for residential land purchases. (Telegraph, Independent)