In the largest increase since July 2002, annual inflation in the UK has risen to 3% from March’s figure of 2.5%.
In April, the Consumer Price Index (CPI) hit 3%, its highest point for 13 months. This is well above the 2% target set by the Government and will lower expectations of an interest rate cut over coming months.
Mervyn King, governor of the Bank of England (BoE), may have to write to the Chancellor if inflation tops 3% to explain why inflation has risen to this level and what is being done to combat the rise. This would be the second time that a letter of this sort has been sent in the 10 years since the BoE assumed monetary policy, the first time was in April 2007 when inflation was above 3%.
The announcement of inflation hitting 3% could be an explanation behind the decision by the Monetary Policy Committee (MPC) to hold interest rates at 5% this month. The MPC would have been aware of the CPI before the data was officially released.
Applications for New Homes Fall by 30%
According to The National House-Building Council (NHBC), applications to start building new homes fell by almost a third in Q1 2008 due to a “toughening market”.
The statistics released by NHBC showed in the first three months of the year 37,839 applications for new homes were submitted. For the same period last year 53,717 applications were submitted, which is a drop of 15,878 or approximately 30%.
The figures also showed a decrease in the number of completions during this period. In Q1 2007 the number of completions were 40,996 compared to this year where the number dropped to 35,205, a fall of 5,791 or approximately 14%.
The statistics provided by NHBC follows the announcement by The Office of National Statistics (ONS), that the value of new homes being built in Britain had reached a seven-year low. Over recent weeks home builders have been reporting a fall in demand for new homes, with one developer, Persimmon, announcing that they were putting all new developments on hold until the mortgage market improves.
Government Announces Improvements to HIPs
The Government has announced new measures to increase the effectiveness of Home Information Packs (HIPs) for both buyers and sellers during the home buying process.
The new measures include: developing a set of industry standards for property professionals to adhere to; improvements to the quality of information contained within HIPs; working with property professions to help customers gain the most benefit from HIPs; extending ‘first day marketing’, the allowance for sellers to market their property as long as they have committed to and paid for a HIP, until the end of the year and the requirement for the lease to be included in the HIP for all leasehold properties.
Paul Broadhead, deputy director general of The Association of Home Information Pack Providers (AHIPPs), told PIN: “The implementation of HIPs is going well and the packs are making a difference with home sales going through 12 days quicker. There is still much more work to be done as the packs need to be more consumer friendly.”
When asked whether the new measures announced by the Government would do this he said: “The intention is there and it will be good to work with the industry”, although he did feel that the Government had “missed an opportunity by not including the Home Condition Report, because the most important thing for the consumer is the condition of the house and whether it is still going to be standing in six months”.
Peter Bolton King, chief executive of NAEA, welcomes the Government’s objective. He said: “We have always maintained that in their present state, they are of little use to either seller or buyer and therefore we embrace the opportunity to come up with a package that includes real benefits to the customer and will actually assist the buying and selling process - after all, that was the original intention of this legislation. If this cannot be achieved we continue to maintain that HIPs should be scrapped.”
MoJ figures Show Rise in Repossession Court Orders
Figures released by The Ministry of Justice (MoJ) on Friday showed a rise in court orders for repossessions within England and Wales during Q1 2008.
The number of repossession orders in this period were 9% higher than the final quarter of last year and 17% higher than over the same period in 2007. The MoJ figures do not show the actual number of properties which were physically repossessed, instead they only show the number of actions put forward by mortgage lenders to the courts. A much smaller number of these court orders will lead to actual repossession.
Following the release of the figures, both The Council of Mortgage Lenders (CML) and The Royal Institution of Charted Surveyors (RICS) passed comment.
CML stated that the figures should be kept in perspective. Out of 11.8m mortgages CML expects 45,000 of these to end in repossession this year, approximately 0.38%. Bernard Clarke, communications manager for CML, puts these figures into further context by referring to the repossession data for the mid nineties, where the number of outstanding mortgages was over one million more. This means that the overall percentage of repossessions was higher at approximately 0.47%. When looking beyond 2008 he said “There is not much sense predicting beyond 2008 because there is so much uncertainty in the markets at the moment.”
David Stubbs, senior economist of RICS, echoes the estimation put forward by CML: “ We continue to believe that repossession themselves will increase to around 43,000 in 2008, still well below the low point of 76,000 in 1991.”
East End of London to Receive Regeneration Boost
Housing Minister, Caroline Flint has announced a £237m redevelopment programme for areas in the east end of London.
Eight areas of the London Thames Gateway have been targeted for regeneration; Canning Town, Lea River Park, Olympic Arc, Bromley-by-Bow, and the London Riverside areas of Barking Town, London Riverside Parklands, South Dagenham and Rainham Village. Investment will be focused on housing, jobs, infrastructure, community facilities and green spaces. This will take place in the next few years, creating around 7,900 new jobs and 8,200 new homes.
Emma Joy, communications manager for London Thames Gateway Development Corporation (LTGDC), told PIN: “The areas of investment were chosen as it was judged that this was where market forces (natural competition within an area that would stimulate growth) had been least successful. It was felt that a focused and time specific public intervention would be most effective”
The ethos behind the redevelopment, which is to be lead by LTGDC, is one of building a ‘sense of community’, not only within the areas but also between them. With this in mind improvements to systems of infrastructure will be a major part of the programme, with the installation of pathways and bridges along with continued improvements to the road networks connecting these communities.
Lorraine Baldry, LTGDC chairman, said “Regeneration of the Lower Lea Valley and London Riverside means more than just building houses. Our plan for the next three years is to drive forward schemes which will create a sense of place and belonging for local people and an environment that attracts new residents and businesses to settle.”
DJ predicts a challenging time for commercial developers
The latest Drivers Jonas (DJ) Central London Crane Survey predicts a challenging time ahead for commercial property investors and developers.
It claims that conditions in London’s current office market following the economic and financial turmoil have left developers wondering where they are going to find tenants for their new buildings and a 15% increase of speculative space under construction.
Weakening demand for the City office market comes at the same time as the construction activity is its highest since the early 1990s. This will translate into more choice and lower rents for occupiers who have been at the mercy of the landlords for some time now. Outside the City market, developers can be more upbeat as building activity in general remains more constrained.
Not all doom and gloom, DJ notes that developers are now not starting work on new City schemes which means an under supply in 2011 and 2012. Across London, new starts have slowed considerably since the last survey (six months ago) from 46 new developments to just 26. DJ predicts this trend to continue into the next report as the research shows that few London developers are confident enough (or can secure funding) to develop into 2011/12. Given time to readjust, and the over-supply is absorbed, the market will once again become under-supplied and start to show positive rental growth.
Anthony Duggan, partner and head of research at Drivers Jonas, said: “It’s a symptom of the dynamics of the property market that means that construction is still rising while the demand dynamics are heading in the opposite direction. However, we have seen a reduction in the number of schemes started and we expect a further reduction in the next survey. Also remember, in some of the London submarkets construction still looks a viable prospect. Southwark, for example, saw two new starts in this survey – this doubles the number to just four relatively small schemes under construction in this market, and nothing at all completing this year. It would be unfair to tar the whole of Central London with the City brush.”
CML welcomes Government’s plan for FTB
The Council of Mortgage Lenders (CML) welcomed the announcement in the Government’s draft legislative agenda of plans to provide more help for first-time buyers, in particular the widening of access to shared equity schemes. In future, all first-time buyers with an income of less than £60,000 will have the opportunity to apply to buy a share of their home.
Other measures announced in the legislative programme include: an initiative to enable the Housing Corporation to allocate up to £200m to buy new properties on the open market, to be made available either for first-time buyers to purchase through the Homebuy scheme or for social renting. Although this will have only a relatively modest impact on the housing market, it has the potential to widen the first-time buyer shared equity scheme. In addition, proposals to give the Bank of England greater flexibility to respond to credit market conditions by allowing short-term non-disclosure of liquidity assistance is another measure. Lenders believe the bank should be able to respond flexibly to changing conditions in credit markets.
Michael Coogan, CML’s director general, said: “The Government’s announcement on shared equity means that its approach is now more logical, providing help based on the income rather than the occupation of buyers. It will remove an anomaly by which providing help for one group of less well-paid workers makes access to home-ownership more difficult for others earning similar salaries but working in different jobs.
“The Office of Fair Trading’s (OFT) market study in sale-and-leaseback is also welcome, and we hope it will be completed by September, as promised, and acted upon quickly. The reality is that sale-and-leaseback companies are already targeting home-owners in difficulty. The quicker we have effective regulation of the sector to provide protection for consumers, the better the safety net for borrowers in financial difficulty will be.”
Public positive to ‘eco-homes’
According to research published by Knight Frank and EC Harris, the British public have a positive attitude towards both newly constructed ‘eco-homes’ and environmentally friendly upgrades to present homes present houses..
The research showed that although the traditional factors of price, proximity to schools and privacy were still the most important issues when it comes to buying a home, 43% of respondents said the environmental issues were of significance significant when making that same decision.
When the survey asked about future property purchases, environmental factors became even more significant. Around 76% claimed energy efficiency was an important factor, 96% considered low running costs as significant and 58% could see the cost saving benefits of renewable energy sources. Although concerns have been raised about the cost of ‘eco homes’, 58% of respondents said that they ‘would be willing to pay a premium’ for such properties.
The research also looked at attitudes to upgrading current homes with more energy efficient features. Some 87% of those asked said that they would not oppose fitting those features if it was made compulsory and 86% would be open to the offer of more information on eco-measures.
Mark Farmer, head of private residential at EC Harris , said: “The real challenge for the industry is how to deliver the required step change towards zero carbon by 2016 within the parameters of technical and financial viability. Despite the likely increase in market sentiment towards eco - friendly residential product and the ability for developers to drive value, the current cost premiums for compliance are not sustainable in real terms. Innovation and supply chain diversification will be key to creating a viable platform for delivery of zero carbon homes in the future.”
Plan for New Homes and Jobs in East of England
The East of England is to receive a huge regeneration boost over the next 20 years, focusing on an increase in housing and jobs while also improving the infrastructure of the region.
The revised Regional Spatial Strategy (RSS), recently published by communities ’ minister, Parmjit Dhanda, offers a plan for ‘continuing growth and spreading prosperity to all communities in the East of England’. The RSS has set out to deliver 508,000 more homes and 452,000 new jobs by 2021. This is in response to figures that new households in the area are expected to grow by 30,500 a year up to 2021.
From Between 2008 - and 2011 , there is expected to be £150m of investment in new developments around the main towns and cities of the East of England, which this will include a minimum of 35% affordable housing, along with funding being available for schools, hospitals, leisure centres and transport links.
Parmjit Dhanda , communities minister, said: “This plan is a big step forward in addressing the demands in the East of England. It will deliver the affordable housing, better transport networks, stronger environmental protections and new jobs that the region needs.”
Parliamentary Inquiry into Greener Commercial Properties
MPs met recently to begin discussions on environmental issues surrounding existing commercial properties.
The All Party Urban Development Group is the first parliamentary inquiry into what can be done to lesson the environmental impact of commercial properties. Currently, commercial property contributes approximately 5% of the countr y’s ies’ carbon emissions. Business leaders have previously called for evidence of the financial impact and the cost to benefit ratio for any of the proposed changes. There is expected to be calls for a Government incentive scheme to help with the costs of making properties greener. Those appearing before the inquiry have welcomed the chance to put forward the business perspective and to have a forum where the ir re concerns can be heard.
James Rae, chief executive of the Consensus Environmental Real Estate Team (CERET), welcomed the inquiry, he said : “Any enquiry into the ‘greening’ of commercial property has to be a good thing. More questions mean more answers on how to solve the issues that we face. Only through debate can we come to a sensible decision. This is in fact the most important issue facing mankind at the moment.”
