RICS calls for Government Help as housebuilding targets collapse

Housebuilding is set to fall below 100,000 over the next year with a rapid policy rethink necessary if 3m homes are to be built by 2020, says the RICS.

It claims to reduce the excesses of the boom-bust cycle, a more sustainable approach to housebuilding through the bad times is needed.

Oliver Gilmartin, RICS senior economist, said: "Financial pressure on housebuilders amid a dearth of transactions will see marginal projects put on hold for the time being, sending Government housebuilding targets further into the wilderness."

SH Note: Frankly, it’s all a bit late. Yes, it’s true that the overall housing shortage exacerbates boom and bust cycles. But the help we really required was to have a planning system that allowed us to build more of the types of homes that were needed, where they needed, when people could afford to buy them. To date, the only “help” we’ve received is restrictive planning that’s ordered us to build flats in places they’re not wanted. With friends like that, who needs enemies?

Credit Crunch doubles deposit needed to £40,000

Homebuyers after the best mortgage deals need a deposit of nearly £40,000 - double the amount needed last year and more than two years’ average take-home pay.

The study, from the mortgage adviser Mform.co.uk, found that in August last year, an average deposit of 11.75 per cent was required for the best deals. Today, it has risen to 20.75 per cent.

With an average house price of £180,800, this means a buyer would need a deposit of £37,512, compared with £21,000 last year.

Those who have recently bought a home but did not put down a big deposit and need to remortgage will also be caught in the trap. The new data comes as figures from the British Bankers' Association show the number of owners remortgaging has crashed to its lowest level for seven years.

The worst hit are those who borrowed 95 per cent or more of their home's value and are effectively stuck with their current lender. Meanwhile, the number who managed to get a home loan in July was 22,448, 65 per cent lower than in the same month last year.

RICS warned the figure is far too low to stop house prices from falling further.

Halifax to close 25% of estate agencies

Halifax is closing a quarter of its estate agents branches as a result of the downturn.

It will shut 53 of its 204 branches before the end of the year, leading to 100 job cuts..

This comes just a week after HBOS, which owns Halifax and Bank of Scotland, announced more than 400 jobs cuts as part of wide-ranging shake-up, including the closure of The Mortgage Business, its specialist lending arm, and the scaling down of accounts offered by Intelligent Finance, its online banking arm. Halifax says it will now concentrate on its core estate agency business in the Midlands and the North.

Humberts estate agents, has also reported losses of £16 million in June, while John Charcol, the mortgage broker, was forced to shut three offices and cut its workforce by a quarter in June.

“Game Over” for Fannie and Freddie

Warren Buffett has predicted that "the game is over" for Fannie Mae and Freddie Mac, America’s two biggest mortgage financers, as independent companies.

And he claims the US economy will remain in the doldrums for at least five months.

Mr Buffett said Fannie and Freddie, which underpin America’s mortgage market by buying home loans and packaging them into bonds, "don’t have any net worth".

This is because the two mortgage giants face huge losses on the mortgage bonds, meaning that they will probably need a cash injection from the US Government to keep them afloat.

But he added that "they’re too big to fail" and predicts the Government will bail them out. However, this expected injection would wipe out the value of previously issued shares and so investors are fleeing the groups’ stocks. Both are down by more than 90 per cent this year.

Buffett was also downbeat about the housing market and the broader economy.

"What we’re seeing in business, in our retail business or anything having to do with housing, is even a further slowing down in June and July, both in terms of credit experience where people first got into trouble with house payments, and now credit card payments," he said.

"In my judgment, the economy won’t be any better five months from now."

UK recession a certainty

The British economy shuddered to halt between April and June, ending its longest stretch of economic growth for more than a century. GDP did not grow at all in the second quarter, according to ONS statistics.

Jonathan Loynes, chief economist at Capital Economics, said: "The economy now looks set to grow by just 1.2 per cent or so this year, with a very strong chance of a technical recession in the second half. And things will be considerably worse in 2009."

The ONS revised down second-quarter growth to zero from initial estimates of 0.2 per cent after the economic slowdown hit construction and manufacturing harder than thought. Economists had expected growth of 0.1 per cent.

Construction has been the hardest hit with output falling by 1.1 per cent in the second quarter, more sharply than the initial estimate of 0.7 per cent. But manufacturing output also fell by 0.8 per cent, revised down from a 0.5 per cent fall, whilst initial estimates for growth in the services industry were halved to 0.2 per cent from 0.4 per cent.

Mortgage lending to shrink a further 20% despite lenders’ rate cuts

Hopes for a mortgage market recovery have been dealt a further blow after a leading data analyst said that lending is set to shrink by a fifth.

Datamonitor says UK lending will fall by 20 per cent by the end of this year and that the full impact of the credit crunch has not yet filtered through to borrowers.

The grim forecast came despite the recent round of rate cuts from some of the UK's biggest lenders. Halifax, Abbey and Cheltenham & Gloucester have all cut rates over the last few days as the cost of funding has fallen.

However, with fewer lenders and loans, higher prices and stricter rules, the group predicts that mortgage lending will continue to fall, by a total of 19.3 per cent in 2008 and a further 3 per cent in 2009.

Meanwhile Standard & Poor's has forecast that house prices will fall by a further 17 per cent next year, while Global Insight, the economic consultancy, said prices would plummet by a further 20 per cent until 2010, or £40,000 on an average property, before the market begins to recover.

Melanie Bien, director of Savills Private Finance, said: "The mortgage market is a fraction of the size it was last year and we expect this situation to continue into next year. Only the biggest lenders seem to have any appetite for lending and these have been reducing rates in recent weeks. However, criteria are not easing so it is still only those with significant deposits or equity in their homes who will benefit the most from these reductions in rates."

And Darling’s Dithering “Paralyses” Market

Alistair Darling's dithering over stamp duty has “paralysed” the housing market, prompting a 20% fall in prospective buyers, RICS claims.

It says thousands of house sales have collapsed since the chancellor confirmed that cutting the tax was one of a “number of measures” being considered to boost the economy. With house prices already falling at their fastest rate for 17 years, the hints about stamp duty at the start of this month have encouraged buyers to shelve purchases in the hope that they can save tens of thousands of pounds by waiting until the autumn.

RICS is calling for the chancellor to announce his intentions on stamp duty as soon as possible.

James Scott-Lee, RICS’s stamp duty specialist, said: “In June and July we thought we had reached the bottom of the market. Then the government goes and does this and makes things even worse. August was expected to be bad, but the general view among agents across the country is that they are seeing 20% fewer new buyers in the market than they had expected at the start of the month.”

NAEA confirms collapse in sales

The National Association of Estate Agents says the fall in new buyers estimated by RICS is in line with reports from its members. More than a quarter of the NAEA’s members claim to have seen sales fall through as a direct result of the uncertainty over stamp duty.

Chief Executive Peter Bolton King said the number of sales that had collapsed in the past three weeks over the issue would be measured by the thousand. “We urgently need clarity to get the market going again,” he said. “We cannot wait until the chancellor’s autumn statement. It is proving damaging not just to the housing market but also to the wider economy.”

Moveme.com, a website that allows users to manage their property online, said 63% of buyers who had put in offers in the past three weeks were now seeking to defer completion by 16 to 20 weeks in the hope of avoiding the stamp duty. “There is no doubt the market has been paralysed by talk of a duty cut,” said a spokesman.

SH Note: It’s a handy excuse but buyers are waiting for the bottom of the market to arrive – not saving a few pounds on Stamp Duty
 

Taylor Wimpey profits plunge

Taylor Wimpey plans to scrap its interim dividend payment after first-half profits plunged 96 per cent to £4.3m. The company also announced a write-down on its landbanks in the UK, North America and Spain totalling £690m.

It is still locked in talks with its bankers about revising the terms of its debt convenants and said it hoped to conclude talks by the end of the year, dashing investors' hopes that a relaxation of its £1.7 billion net debt burden could be weeks away.

At the same time it confirmed plans to scrap the interim dividend, arguing the payment was inappropriate given current trading conditions. Shares fell 12.9 per cent to 45.25p in early trading, 86.6 per cent less than its stock was worth a year ago and valuing the company at just £477.6 million - 12 months ago it had a capitalisation of £3.5 billion.

And Redfern asks Government to stay out of it

Taylor Wimpey boss, Peter Redfern, has warned that the Government is unlikely to be able to offer a quick fix for the country's ailing housing market,

He told The DailyTelegraph: "Of course we'd like to see the Government help the market, but our view is slightly different to some other companies. Even if it did intervene, through measures like a stamp duty holiday or a fall in interest rates, we still think the market would be in a difficult position. It's not something the Government alone can fix."

SH Note: Hats off to Pete Redfern. He knows that the Government can’t do anything to fix the problem. Indeed any “fix” will only prolong the agony. Any “help” that does come – say in the form of a Stamp Duty holiday will only generate further panic when what’s needed is confidence.

But Bovis calls on Government to help as profits collapse

Bovis has called on the Government to step up its attempts to support the housing market the housebuilder responds to the "toughest period of trading" it had ever faced during the first six months of the year, with profits crashing by 84 per cent to £9.5m.

Bovis has slashed costs, cutting 40 per cent of its staff, closing its eastern regional office and amalgamating functions between its northern and central offices and aims to reduce costs by 20 per cent this year.

It has so far been able to avoid making writedowns on the value of its land bank, and its average sales price and gross margin have reduced by just 4 per cent and 2 per cent respectively.

However, chief executive David Ritchie said the Government must now consider alternatives to unlock mortgage liquidity.

"People need to be able to access finance to buy property and anything we can do to assist people getting on the housing ladder must be good. While cost-saving measures, for instance a stamp duty holiday, would be very welcome and reduce the cost of moving house, if you can't get a mortgage to support your transaction, you're not going to get off the starting block."

He said further UK interest rate cuts would "clearly be welcome" but predicted difficult market conditions would prevail for the "foreseeable future".

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