A weekly news summary covering all aspects of the House Building Industry, from Pierre Williams
North-South House Divide Flattens Out
House prices have broadly stopped falling in the South and stopped rising in the North as the market flattens out across the country. After two weak months, prices are now stable according to Hometrack. An important indicator seems to be Kensington and Chelsea where prices in May did not fall for the first time in a year. Across the country, buyers are still scarce with a four per cent increase in estate agents’ instructions but less than a one per cent increase in buyers. Overall, prices achieved are 94.3% of asking price. However, these findings are in contrast to the Nationwide which claims the market in the North is still booming where the price of the average home in Yorkshire and Humberside has reached £100,000 for the first time. (Times, Guardian, Express)
Crest Upbeat
Crest’s John Callcutt says that while the market in the South is cooling, prices will be underpinned by the continuing supply shortage. He said: “We are reasonably optimistic. We’re not getting the price improvements that we were but the market has settled down.” The company revealed its £2.2bn land bank, which gained 7.6% in the past year, would last five years. (Telegraph, FT)
Wimpey Sees Prices Level
Wimpey has also reported prices levelling off and said the market was returning to normality. But visitor numbers and sales are still healthy. Chief Executive Peter Johnson said there were no more plans for any more major takeovers. Shares, which have risen 40% since March, increased 8.5p to 316.5p. (FT, Express)
Persimmon Still Strong
Persimmon is expecting to announce better-than-expected results for the second year running. It said profits for the first half would be 20% higher than last year (10% above analysts’ forecasts), a comment that saw shares jump 24p to 487p. Average selling prices for the first half were up 10%. Chief Executive John White said: “Sales since last summer have returned to normal levels and we continue to see price growth across all regions with the exception of London.” The landbank has increased by 2,500 to 55,000 plots partly due to the acquisition of Merewood and further acquisitions are not being ruled out. (FT)
McCarthy & Stone Spurns Founder Buyout Bid
Directors of McCarthy & Stone have rejected an audacious bid for the firm by its founder John McCarthy. Chief Executive Keith Lovelock said the board rejected the offer after advice from UBS said it “did not reflect the right value of the company”. Mr Lovelock said the board had been “robust in its decision to reject the offer” and pointed out that John McCarthy was on a fixed term contract with the company that expires in December. (Telegraph, FT)
Study Calls for Tax on House Profits
The Social Market Foundation “think tank” has called on the Government to increase taxes on homeowners as a way to stabilise prices. It suggested a capital gains tax of 40% on any profit on sale and even an annual property tax of a proportion of a home’s value. The Treasury has made no response to these suggestions. (Guardian, Express)
New Warning of Price Slump
The firm Capital Economics has made a prediction of house price falls of 15-20% from next year. It cites Nationwide figures showing average prices are now 5.2 times salary and says that whenever price/earnings ratios have reached this level in the past, the market has subsequently crashed. (Mail, Express) The prediction takes no account of continuing reasonable affordability through low interest rates and is at odds with nearly all other commentators, notably the outgoing Bank of England Governor Sir Eddie George who insisted a crash is unlikely. He told the BBC: “I don’t think there is a real risk of a crash but we do see a continued moderation to a stabilisation possibly over the next couple of years.”
George Warns Government Against Compulsory Fixed Rate Mortgages
Outgoing Bank of England Governor Eddie George used his last appearance before the Treasury select committee to urge them not to force homebuyers to take up the long-term fixed-rate mortgages that the Chancellor claims are needed to make Euro entry possible. He said such mortgages were available but that it was vital to “let the market decide”. These comments were seized upon by the chief economist of the Britain in Europe campaign who said need for such fixed rates was a “red herring” (FT)
Quite apart from these comments, Michael Coogan of the Council of Mortgage Lenders has poured cold water on the idea that these types of mortgage will ever find favour with British homebuyers. (Independent)
Downbeat New Governor Signals New Rate Cut
The Bank of England’s new governor Mervyn King has given a downbeat view of economic prospects giving rise to speculation that another cut in interest rates is on the cards - perhaps as early as next month (Times)
Sellers Packs Under Fire
The introduction of home sellers packs has been attacked by the Conservatives with claims that its cost will deter homeowners from moving leading to a supply crisis and upward pressure on prices. The National association of Estate Agents joined the criticism saying: “The added cost and nuisance effect of the packs could have a devastating effect on the housing market particularly at the lower end of the price scale.” (Express)
Livingstone Accepts Reduced Affordable Quota for Dome Site
Redevelopment of the Dome site is to go ahead after agreement between Ken Livingstone and the developer Meridian Delta. The project looked doomed after the Mayor originally stuck to his demands for 50% affordable housing whilst Meridian offered 35%. But negotiations between Greenwich Council and the Mayor’s office eventually agreed on 38% affordable plus a further 3% low cost homes. The mixed use development is expected to create more than 10,000 new homes. (FT, Times)
Celebrity Nimbies Attacked
Celebrity nimbies Jamie Oliver and Terry Waite, who both campaigned against the expansion of Stansted Airport and development of the M11 corridor, have been branded hypocrites. An aviation industry backed campaign discovered both were frequent flyers and has taken out newspaper advertisements demonstrating their hypocrisy. Waite admitted it was “not easy” for him to oppose the development while Oliver boasted of his jet-set lifestyle on his own website. (Times)
HBF Note: Campaigners are increasingly turning to local celebrities to promote their anti-development messages. With Jeffery Archer not yet available, campaigners against development in Grantchester attempted with little success to recruit Roger Waters of Pink Floyd to take up their cause but have had more luck with Prof Stephen Hawking.
Pierre Williams
House Builders Federation
July 4, 2003