Persimmon Issues Confident Outlook

Leading home builder Persimmon PLC, today posted a positive, but cautious report for the first half of the year. Reflecting the slight recovery experienced in the wider housing market for this period, Persimmon released the following figures:

• Legal completions grew by 16%, from 4,006 to 4,657 compared to the same period last year.

• Turnover for the period increased by roughly 26% to £785 million

• Sales increased by 20% (helped by ~8% rise in average house prices)

While these figures show a positive start to the year, they were tempered by news that the seasonal decline in private sale reservations was worsened by uncertainty surrounding the announcement of the Government's Budget proposals. Despite this Persimmon claims that sales have continued in line with expectation since the Budget's introduction. The full set of results will be released on 26th August, but already some have questioned the tone of Persimmon's release.

In an article for the Independent yesterday, property broker Investec, said "anecdotal evidence from unquoted industry sources "paints a markedly more downbeat picture of the market" than stock market announcements from quoted companies, adding: "In our view, management of the quoted companies sounds more nervous in tone in conversation than is immediately apparent in their published statements."

Fellow house builder Taylor Wimpey last week released its own update. While positive, the report was less bullish than that of Persimmon. It claims that figures are in line with market expectations, but citing the growing broader economic uncertainty, said it would remain cautious with the scale and pricing of its land buying for the foreseeable future. As such, the company's focus will be to achieve price improvement rather than increases in volume.

Another key player in the new homes market, Bovis Homes, will issue its own trading statement this Friday. Short of any major upsets, it is thought that it will report positive figures similar to that of Persimmon and Taylor Wimpey.  

Sources: RTT | Persimmon | Independent

Regen.net - "Shapps: HCA to escape axe"

A worried man? HCA chief executive Sir Bob Kerslake.

The following excerpts from Jamie Carpenter's, article for Regen.net, 25 June 2010, give more details about Grant Shapp's plans to streamline the HCA, and place it under local authority. 

Shapps said that the HCA will be "much leaner" and that he saw the agency’s future as an "enabling and investment body".

Shapps told delegates: "I can confirm that the HCA will stay. But I think it needs to operate in a genuinely local way – at the invitation of local people who want to improve their communities."

He added: "It will be smaller, more strategic – with the HCA’s functions being delivered under local leadership. It will be much leaner."

Shapp's announcement clearly shows that the HCA is in for a drastic upheaval,  supporting my earlier article, about the mounting issues awaiting the coalition's Big Society approach to planning and home building. 

(Jamie Carpenters full article can be found here.)

Big Society - Big Risk?

New plans to give local people more power over the number of homes built in their area, are causing concern among housing experts. The news comes at a time when household formation outstrips house-building, increasing life expectancy, and people remaining single, are all causing demand for social and affordable properties to grow rapidly. Although some accept that action is required, there remain serious questions regarding the short term viability of the proposals.

Public funding for affordable and social housing severely cut.  

The Homes and Communities Agency (HCA), which is tasked with channelling government money into social and regeneration projects, plays a vital role in keeping the housing industry ticking over. For instance, last year, almost three-quarters of housing projects started (64,800), were partially funded by the HCA. Already, cuts have seen the HCA's National Affordable Housing Programme's budget chopped by £230m, while the agency fears that another £610m will be lost from its budget this year. Compounding the issue, is a "three year spending review" of the HCA which due to commence shortly.

In funding housing developers to build affordable housing, the HCA has effectively propped up the industry. Councils, housing associations and private builders will be hard pushed to meet the required levels without this assistance. For instance, The National Housing Federation has already warned Housing Minister Grant Shapps, that the cuts could well see building rates drop by as mush as 65% to 1990 levels.

In light of this, it seems unrealistic to expect housing levels to increase, however that is exactly what the coalition government is hoping the private sector will facilitate.

Housing targets have dropped nationally.

Another element of contention, is the scrapping of house completion targets. The targets, which have been used to assess progress since the late 1950s, are to be replaced by councils deciding for themselves the level of building required in their areas. In essence councils will assume responsibility for setting out localised planning regimes.

However, the government's insistence on placing the burden of delivering the levels of housing needed, on councils raises serious questions. Many councils have seen their budgets slashed, either as the result of failed investments (Iceland anyone?), or as a consequence of Osborne's razor sharp budget. Adding to the conundrum, many authorities have insufficient planning capacity and knowledge to meet the rapidly growing demand.

Perhaps most worrying, is the omittance of a transitionary period for councils to adapt to the changes. The government's desire to abdicate its responsibility, to an unproven planning system is clearly an example of it's Big Society strategy, but this high-risk strategy comes at a time when the industry is still suffering one of the deepest crises in memory.

In summary, with a staggering housing shortage already affecting house prices and builders heavily reliant on state assistance, a delay in increasing production will undoubtedly exacerbate the situation further.

Council of Mortgage Lenders: Mortgage lending up 7%

Amongst all the doom and gloom surrounding the housing market, it's a welcome change to come across a positive news story!

The Council of Mortgage Lenders today issued a press release, showing a considerable increase in gross mortgage lending in the UK. Their figures show a 7% increase for the month of May compared to April, and 10% compared to May of last year.

According to the CML, the mortgage market remains subdued, with turnover marginally below the figures seen at the end of 2009, and gross lending slightly under the CML's forecast of £150 billion for 2010.

CML economist Paul Samter commented: "The ground has been cleared for next week's budget to be the start of an austerity drive to get the public finances onto a more sustainable footing. We do not expect it to include housing and mortgage specific direct tax measures. But the market will inevitably be affected by how policy impacts on the wider economy - particularly on household finances and confidence,".

Should the mortgage market stagnate and lending levels decline sharply, it will be interesting to see which tools the BoE employs from its array of newly gained powers, to regulate and possibly ration the mortgage market.

"Google goes house-hunting"

Unabashed by recent controversy surrounding the amount of information it stores, Google yesterday unveiled its new property listing service. Adding a house-hunting function to Google Maps UK, it provides all the vital housing-hunting information such as statistics on rooms, distances to amenities, price and location.

The service allows users to select a location and view available properties in that area. Indicated by small circles on the map, properties can then be sorted by price, features and type of property. The feature works in tandem with Google Street View, giving house-hunters the ability to gain a sense of perspective on properties. 

Signifying their serious commitment to the move, Google launched the service with a number of high profile UK partners. Among them are Countrywide, the UK's largest estate agent, Sotherby's Inernational and Spicer and Harrt.  However, one notable absentee form the service is Rightmove, the UK's largest property portal. Unlike Rightmove, Google does not charge agents to appear online. Rather, it intends to generate revenue solely from advertising.

Perhaps the most interesting element of Google's new offering is the inclusion of private sellers. Although a number of small niche services offering this feature exist, Google Property is by far the largest player to date. With the likes of Spicer and Harrt and Tesco offering online estate agency, the trend of property sales moving away from traditional high-street estate agents appears to be growing.

George Osborne outlines plans to hand Bank of England new powers

In his first Mansion House speech, George Osborne outlined plans to give The Bank of England (BoE) far reaching new powers over Britain's financial system. In particular, the BoE will given the responsibility of overseeing the health of the housing market. Citing the easy availability of credit, 100%+ mortgages and low interest rates as key factors behind unsustainable house price increases, the chancellor of the exchequer argued that the BoE's new toolkit will enable it to avoid another housing bubble.

The BoE's new powers will also extend to curbing risky banking practices. This may well constrain the amounts which banks are able to loan to homebuyers, effectively allowing banks to place a cap on the amount homebuyers would be able to borrow. Full details of the new powers are to be unveiled in the emergency budget on the Tuesday 22nd June.

Sources: Channel 4 News | The Guardian
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On a separate note - a big hello to newhomesinbirmingham a Birmingham-centric blog featuring all the latest news about housing developments in Birmingham.