A weekly news summary covering all aspects of the House Building Industry, from Pierre Williams
Housing Market Rules Out Euro Entry
The Chancellor has ruled out Britain’s entry into the Euro until major reforms are introduced to prevent a return to boom and bust in the housing market. In essence, an initial assessment of these reforms centred on two major factors aimed at achieving market stability: speeding up house building and a move to fixed-rate, continental-style mortgages. Mr Brown announced he would give a progress report on what these reforms had produced so far in Spring 2004. However, there is widespread scepticism in Westminster that there will be sufficient change in the economy, housing supply and mortgage reform for the Chancellor to report any significant progress. (All media)
Planning Bill Delays – Ministers’ Reasons
The Planning Bill has been delayed for three reasons according to Minister Tony McNulty – to reconsider abolition of outline planning consents, planning tariffs, and the duration of planning consents. He also said Government would make “concessions” on these issues after hearing concerns from industry bodies. (Property Week)
HBF Note: Although these are the cited reasons for the delay, the fact the delay was announced just a week before the Chancellor called for more house building and tougher planning laws to ensure housing delivery, suggests otherwise.
Prescott Echoes Chancellor’s Call for Market Stability
John Prescott has waded into the Euro debate saying: “If you want to do something about adjusting an economy to enter Europe you’ve got to solve the housing problem and all that’s related to it.” However, he remains cautious about growing speculation that property taxes would solve the problem. He said: “I’d like to see mortgages and the finances around housing changed a bit but you’ve got to be very careful.” Commenting on the idea of a land tax, Prescott said: “I’ve always found it very unacceptable that we can have massive property value increases in areas by local authorities investing in something and the country doesn’t get the real benefit from it.”
HBF Note: There are now four principal tools available to government to address stability:
· A new land or property tax
· Stamp Duty changes
· Long-term fixed-rate mortgages
· Tackling undersupply.
Stamp Duty changes or any other direct property taxation would appear dangerous for the government’s re-election prospects. Fixed rate mortgages look unpopular with buyers and lenders. Tackling undersupply, although the most effective long-term solution, is not a quick fix. This is perhaps the reason why a new tax on increased land values is currently at the top of the pile.
Tackling Undersupply is the Sustainable Route to Market Stability and EMU
Although the Chancellor has a selection of tools to tackle housing market volatility in his attempt to make conditions right for entry into the Euro, only one is sustainable. Pierre Williams for HBF says further property taxes would prove unpopular and fixed rate mortgages uncompetitive. Tackling undersupply would prove sustainable, would reduce the need for public spending on temporary solutions, expand the property-owning democracy and at the same time help achieve the elusive but key government aim of “a decent home for all”. (BBC News)
More Speculation of Increased Mortgage Costs
Speculation is increasing that the Chancellor’s efforts to expand fixed-rate mortgages will simply result in massively increased payments. A leading broker said: “There’s absolutely no doubt repayments will be significantly higher on the long-term, fixed-rate mortgages the Chancellor wants to see. The reason is simply that the interest rates will be higher.” (All media)
First Time Buyers – An “Endangered Species”
The number of first time buyers has fallen to a record low of just 14% of house-hunters according to the National Association of Estate Agents. This figure contrasts with 25% last year and the association expects the figure could fall as low as 9% by the end of this year. Lack of affordability is the principal reason but lack of confidence is also a major factor with the market remaining flat in the south. However, the NAEA has ruled out a crash and is talking positively about a recovery if interest rates continue to fall. (All media)
McCarthy & Stone “Approached”
McCarthy & Stone has received a preliminary approach that could lead to an offer for the company. The news sent the share price up 9% (42p). Speculation followed on whether Persimmon, George Wimpey, Taylor Woodrow or a venture capital firm were the potential bidders. Analysts said the bid for the £516m firm – which has performed very well over the past six years - would fit in well into the portfolio of several house building groups. The company said in April that increased demand for retirement homes had outstripped sales targets for the half year. (FT, Times)
Pierre Williams
House Builders Federation
June 16, 2003