A weekly news summary covering all aspects of the house building industry from Pierre Williams, available to members only.
HBF Weekly News Summary August 4, 2003
Government Unveils Detailed South East Growth Plans
Six months on from the launch of the Communities Plan, the Government has announced the specific areas within the designated growth zones where it wants to see more house building. Six areas in the Thames Gateway east London, Greenwich, Woolwich, Barking Reach, Thurrock and North Kent Thameside have been earmarked for 200,000 more homes than originally planned for the region. Some extra detail on where housing would be built in the other three main growth areas in the south east was also announced. John Prescott said 330m would be spent over the next three years on 100 projects to open up key development sites and urban development corporations will be set up in Thames Gateway growth areas to push development ahead. HBF warned that whilst welcome, the plans would only be fully realised if sufficient investment was forthcoming and planning authorities did not disrupt the proceedings. (All national press, BBC)
New Slump in First Time Buyers
First time buyers are deserting the housing market according to figures from the Nationwide showing a 31% drop in the number of FTBs getting on the property ladder. The total number of FTBs for 2003 is likely to be the lowest for 20 years and points to the twin problems of some being simply unable to afford while an increasing number hold back for a fall in prices. The Mail adds that the problem is compounded by FTBs having to find deposits of up to 30,000. However the Nationwide, like most other lenders, is confident that a price slump is not likely and said average prices rose 1% in July. A spokesman said: There is every indication the market is slowing down without major problems. (Standard, Mail, Express)
Wimpeys Fantastic Results
Its jam today for Wimpey shareholders as the company announced a strong improvement in operating margins and a big rise in dividends after two painful years of restructuring following the acquisition of McAlpine and Laing. Turnover in the first half rose to 1.06bn, operating profit was up to 148m and pre-tax profits were up to 122.7m. Shares increased 17.5p to 341.5p. Analysts described the figures as excellent. Chief Executive Peter Johnson said the results were the result of robust management - a two-year programme of cost savings and better land buying terms. Further consolidation has been put on the back burner. Johnson added: We are delivering growth, reducing gearing and growing the dividend at a rapid pace this must be a better thing to do for shareholders at the moment than going out and seeking further acquisitions. (FT, Times, Telegraph, Sunday Times)
HBOS Forecasts 10% House Price Growth
Britains biggest mortgage lender HBOS has raised its forecast for house price growth in 2003 to hit 10%. The bank based its forecast on a growth in lending and a reduction in the average loan-to-value from 63% to 61%. With the majority of its lending well cushioned by such substantial buyers deposits, the bank concludes that by far the biggest risk of a property price collapse is a huge rise in unemployment. (Times)
Soaring Debt Fuels Slump Fears
British consumers relentless appetite for debt is increasingly worrying economists who fear it could lead to a severe 80s-style economic downturn and a housing market crash. The Liberal Democrats trade spokesman has fuelled fears warning homeowners to prepare for an almighty crash. New figures from the Bank of England reveals personal debts surged by a record 10bn in June. The number of people going bankrupt has also hit its highest level since the last recession. The Government is worried and a Commons select committee has ordered in the heads of the five biggest lenders to grill them over alleged irresponsible lending. (all media)
Cost of Fixed-Rate Mortgages Rises
The cost of fixed-rate mortgages is on the rise and fuelling expectations of across-the-board mortgage increases by the beginning of next year. Halifax and Woolwich have already introduced higher fixed rates and others are expected to follow a trend that will further weaken confidence in the housing market. However, there is no sign yet that the bank of England is about to raise base rates, despite its concerns about the record level of consumer debt. (FT, Business, Express, Observer)
Developers Increase Sales Incentives
Developers are increasingly offering extravagant incentives to get deals done in todays nervous market. Luxury cars and holidays are the most commonly-used new incentives alongside the conventional offers of paying Stamp Duty and legal fees. Other new incentives range from Laings free scooters to buyers on one of its Clapham developments, to the timeshare of a private jet for buyers of Canary Riversides penthouses. (Times)
Urbanites Buy Up Small Farms
Two-thirds of farms sold go to buyers who have no intention of farming the land but simply seek a tranquil life. Increasing numbers of well-heeled urban professionals are buying up the farms with the problem most acute in the south east. The trend is in line with that of wealthy town dwellers buying up country houses for as one agent put it - the purpose of controlling the living space and environment around them. (Telegraph, Mail)
Analysts Lament Unloved Housebuilders
Despite a 200% rise relative to the FTSE All-share index, British housebuilders remain undervalued. Broker, Smith Barney, upped its price targets on seven firms last week but it appears that investor confidence is still scarred by the property market collapse of the early 90s. A Deutsche Bank analyst said of the sector: Still so unloved. Life can be unfair. Housebuilders offer the best growth rates in UK construction with earnings growing 15% on average this year, yet the housebuilders languish on multiples below six times earnings. (FT)
Pierre Williams,
House Builders Federation
August 4, 2003