Friday, 19 September 2008Top stories this weekBank of England publishes the Governor's letter to the Chancellor....read moreCML: Gross lending declines in August.....read moreCLG: House price index - July 2008.....read moreQuick LinksEconomic newsGovernment and political newsHousing market newsIndustry newsEventsEconomic newsBank of England publishes the Governor's letter to the ChancellorFollowing the announcement that CPI inflation in the 12 months to August was 4.7%, the Bank has, as required, published a further letter from the Governor to the Chancellor. The Governor states:"Although the factors accounting for the rise in inflation are the same as I described in June, the expected peak in inflation later this year is now likely to be significantly higher than anticipated in June: the Committee now expects inflation to peak soon at around 5%. This is mainly because import prices are likely to be stronger than anticipated three months ago, although the recent falls in oil prices will act to moderate the peak in inflation.""In the absence of further unexpected increases in energy and commodity prices, inflation should peak soon. Nevertheless, each monthly change in food, energy and import prices will, by altering the overall price level, affect the official twelve-month measure of inflation for a year. So CPI inflation is likely to remain markedly above the target until well into 2009...""... if we allow an increase in inflation to become embedded in expectations then a prolonged period of depressed activity and high unemployment is ultimately required to get inflation back down. And because the peak in CPI inflation is expected to be higher than three months ago, the risk that it may have an effect on other prices and costs is now greater. For that reason, the Committee has become firmer in its belief that a period of mute economic growth is necessary to dampen pressures on prices and wages and return inflation to the target in the medium term."Download a copy of the Governor's letter to topBank of England extends Special Liquidity SchemeThe Bank of England has announced an extension of the drawdown period for its Special Liquidity Scheme to provide additional time for banks to plan their access to the scheme in an orderly fashion, in view of the current disorderly market conditions. The drawdown period will now end on 30 January 2009. The Bank will publish its consultation document on proposals for permanent reforms of its market operations at a later date. The features of the Scheme and the terms offered remain unchanged. Read more CML welcomes extension of Bank of England schemeThe CML welcomed the announcement by the Bank of England that the drawdown facility for its Special Liquidity Scheme (SLS) is being extended. The CML's Director General, Michael Coogan, commented: "In making a clear announcement, the Bank has shown a welcome flexibility to respond to difficult market conditions. Its action should help promote stability at a time of uncertainty, and we would urge the Bank to continue to show flexibility, given that market conditions will remain challenging next year."Immediate prospects for an improvement to the operation of wholesale mortgage funding markets had not been helped by the recent tightening of liquidity in response to more widespread financial market uncertainty. The removal of constraints to mortgage funding remains an important requirement for any longer term recovery in the housing market." Read more to topProposed takeover of HBOS by Lloyds TSBThe Financial Times reported this week that the proposed takeover of HBOS by Lloyds TSB would create a combined bank with more than 23m customers. The new group would also be "...the UK's largest mortgage lender with 28% of the mortgage market and a combined home loans book of £335.1bn".Read more CML: Gross lending declines in AugustGross lending totalled an estimated £21.8bn in August, a 12% fall from July and a 36% fall from August 2007, according to the Council of Mortgage Lenders.This is the lowest monthly figure since April 2005 and the lowest August figure since 2002. CML state that exceptionally low housing market turnover and lower than anticipated remortgaging activity will keep monthly lending subdued in the immediate future. CML Director General, Michael Coogan said: "These figures reflect the heightened uncertainty for both lenders and consumers in the mortgage market at present. Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline."Read more to topMinutes of the Monetary Policy Committee publishedThe minutes of the MPC meeting held on 3 and 4 September 2008 were published by the Bank of England this week. The minutes state that:"Most members judged that maintaining the Bank Rate at 5% this month was necessary if inflation was to be brought back to the target in the medium term. This would continue to balance the upside and downside risks to inflation appropriately."Download a copy of the MPC minutes British Chambers of Commerce: UK cannot afford a banking crisisCommenting on the MPC minutes released by the Bank of England David Kern, Economic Adviser to the British Chambers of Commerce, said:"The new MPC minutes reveal a welcome shift towards a more accommodating stance. One member has abandoned his previous calls for a rise in rates, while another member has called for a cut in rates. But the alarming financial turmoil, and the speculative attacks on the share prices of major UK banks, highlight the urgent need for a forceful response."The Bank of England must urgently remove the uncertainties about the extension of its Special Liquidity Schemes, and reconsider its plans for tightening the scheme... The UK cannot afford a banking crisis and banks must be supported by adequate liquidity. Authorities in the UK must be as pro-active as those in the US."Read more CBI: Weak growth in 2009 to lead UK out of shallow technical recessionA shallow recession through the second half of 2008 means that growth in the economy in 2009 will be the lowest since 1992, the CBI has said. In its latest economic forecast, the CBI has cut its GDP growth predictions for both 2008 and 2009. The growth forecast for 2008 has been downgraded from 1.7% to 1.1%. The CBI state that it looks as though the UK is in the early stages of a technical recession, with output in the economy expected to shrink by 0.2% quarter-on-quarter between July and September, followed by a further 0.1% decline in the fourth quarter.However, the CBI also state that GDP should stabilise early in 2009 ahead of a gradual and growing recovery, with quarter-on-quarter GDP growth reaching a near-trend rate of 0.6% by the end of next year. Nevertheless, for 2009 as a whole, the GDP growth forecast has been cut from 1.3% to 0.3%. CPI inflation is forecast to peak at 4.8% this quarter, but thanks to an easing in commodity prices and the weaker economy, it is expected to fall back quite rapidly over 2009, reaching close to the Bank of England's 2% target by the fourth quarter (2.3%). Into 2010, there is a significant risk that inflation will undershoot the Bank's target.Read more to topGovernment and political newsLiberal Democrat Conference: Vince Cable's speechSpeaking at the Liberal Democrat Conference, Liberal Democrat Deputy Leader Vince Cable commented on the ‘collapsing' housing market:"We now see the inevitable consequences of a bursting market bubble. Many houses cannot be sold. The house building industry is collapsing...Millions of families face negative equity. Those who cannot service their mortgages face the threat of repossession. Many families are worried; some are scared. We have the credibility which goes with having warned of the dangers..."The Government must not try to prop up house prices which have to fall back to a sensible level which makes housing affordable for ordinary families. The Government must not compromise the independence of the Bank of England by telling it to slash interest rates and generate another dangerous inflationary ‘bubble'. It must not underwrite new mortgage lending by the banks. It is simply not acceptable to socialise losses and privatise profits. Overpaid financiers rattling their begging bowls and demanding help from the taxpayer should be sent packing."View Vince Cable's speech in full The Liberal Democrats have confirmed their opposition to the Government's eco-towns policyThe Liberal Democrats also passed a motion setting out the party's position on the Government's sustainable communities policies. The motion accepted the need for new housing in parts of England to meet demand, but suggested that all new developments should adhere to green standards. It also said that brownfield land would be better suited for new housing than building on the green belt, and called for greater local democratic control of planning decisions. The party is now opposed to the eco-towns policy.Liberal Democrat housing spokesman Lembit Opik said: "Instead of ensuring all our towns and cities are sustainable, the government is using the green facade of eco-towns to bypass the planning system and ignore local needs and concerns."Read more to topLiberal Democrats approve plans to tackle mortgage and housing crisisThe Liberal Democrat Conference approved the party's plans to help families who are unable to pay their mortgages and facing the threat of homelessness due to the downturn in the housing market.The proposals, which aim to reduce repossessions and increase the stock of social housing, include:Introducing regulated Mortgage Rescue Schemes to allow families struggling with repayments to sell all or part of the equity in their house and rent it back from a housing association or private firm to help keep them in their homeAllowing councils and housing associations to borrow money to buy up land and vacant new homes for use as social housing Giving courts guidelines to only allow homes to be repossessed as a last resort, making the mortgage lenders' voluntary code binding on all lenders Read more New rules aim to help home improvements and world heritage sitesNew development rules which aim to cut the red tape for home improvements, combat the effects of climate change and protect World Heritage sites have been introduced by Housing and Planning Minister Caroline Flint.New planning regulations being laid in Parliament will mean that from October the majority of homeowners will no longer need to get planning permission when extending their existing homes.The changes will allow people to build both up and out for the first time without needing to pay to up to £1000 to be granted specific planning permission. As a result, a quarter of all householder applications (80,000) will be removed from the planning system each year, potentially saving the nation up to £50m.Additionally, all 17 English World Heritage Sites will be upgraded to the same protection levels as conservation areas, national parks and areas of outstanding beauty. For the first time these sites, which include the Tower of London, Hadrian's Wall, Westminster Palace, Maritime Greenwich and Durham Castle will be protected against potentially damaging development.Read more Sunday Herald reports Mervyn King warning on No. 10's mortgage schemeAccording to a report in the Sunday Herald, the Governor of the Bank of England, Mervyn King, has privately warned Downing Street that he will resign if Gordon Brown directs the bank to become the key agency in a state-backed mortgage guarantee system.The report states that transferring the risk of investing in mortgage-backed bonds from investors to the Treasury, a move that would see the government "underwriting" mortgage deals, is understood to be one of the key recommendations contained in the final report from Sir James Crosby, the former head of HBOS. Crosby was commissioned to look at new ways of reviving the UK's ailing mortgage market.The Sunday Herald also stated that sources say the Prime Minister believes a temporary guarantee system, with the government refinancing bonds every two or three years, could be the magic bullet that revives the housing market and Labour's political fortunes.Read more to topHousing market newsCLG: House price index - July 2008The latest UK house price index statistics produced by Communities and Local Government were released on Tuesday 16 September 2008.The latest statistics release includes data based on mortgage completions during the month of July 2008.The key points from the release were:UK house prices were 0.3% lower than in July 2007. The mix-adjusted average house price in the UK stood at £217,171 in July 2008 (not seasonally adjusted). UK house prices fell by 0.5% in the quarter ending July 2008. This compares with a fall of 1.3% for the quarter ending April 2008. Annual average house prices increased in Scotland (+3.6%), but fell in England (-0.3%), Wales (-0.8%) and Northern Ireland (-10.3%). Annual average house prices paid by first time buyers in July 2008 were 1.6% lower than a year ago. By comparison average house prices paid by former owner occupiers were 0.1% higher. Download a copy of the index to topIndustry newsGlobal credit crunch could delay 2020 housing target by up to nine yearsNational Housing Federation Chief Executive David Orr will issue the stark warning that the 2020 housing target could be delayed by nine years at the ICC, in Birmingham, when he addresses the annual conference of the Federation, which represents England's housing associations.Mr Orr believes that unless radical action is taken immediately only around 1.6m homes will be delivered by 2020. Based on those figures, the three million target figure may not be reached until 2029. Mr Orr will say: "The Prime Minister was both brave and right to put the dire need for new housing centre-stage, and make it a national priority, when he took office last summer. He is rightly aware that too many people are living in cramped and unsuitable conditions and that more than five million people will soon be on waiting lists for social housing."However, with the global credit crunch worsening, and conditions getting tougher for all house builders, it is time to recognise that the very commendable 2020 target is now almost impossible."The climate for house building has changed beyond all recognition, for both private developers and social house builders. The number of homes being built is falling, and we need the Government to take further action to put the programme back on track."Read more BPF planning manifesto unveiledSainsbury's Planning Chief, Sue Willcox, launched the British Property Federation's Planning Manifesto this week.The BPF say that developers should be encouraged to contribute resources to help local authorities deal with planning applications. Councils are already allowed to do this but fears over issues of probity are restricting its use. Liz Peace, Chief Executive of the BPF, said:"Our recommendations are designed to make the best use of what we have, mostly without the need for legislation or substantial extra local authority funding. We must ensure local politicians and officers understand how development operates and encourage developers to contribute towards more efficient processing of applications."Read more to topConstruction Industry Scheme warningGrant Thornton has become aware of an instance where HMRC is seeking to treat a settlement following an employer compliance visit as a compliance failure, with consequent withdrawal of gross payment status for a 12 month period. This may have a direct (and potentially damaging) impact on the construction industry. Download a copy of the HBF member briefing regarding this issue HMRC guidance: VAT implications of renting new-build propertiesHMRC has issued a guidance note on the VAT implications of temporarily renting out new-build properties in the current market conditions. Members should be aware of the impact that the renting out of a new property can have on VAT status and the ability to recover full input VAT on the development of new build property. Download a copy of the HRMC guidance to topThe Financial Reporting Review Panel announces Priority Sectors for 2008/09The Financial Reporting Review Panel has announced in its review activity in 2008/09 that it will focus on house builders as one of its key sectors.Sectors are chosen by the Panel following a risk-based assessment and discussion with the Financial Services Authority and the FRC's Standing Advisory Group, an independent committee which comments on the Panel's proposals. The Panel will pay particular attention to disclosures relating to financing arrangements and risks and uncertainties in the light of credit market conditions at the time of approval of financial statements.Announcing the proposal, Bill Knight, Chairman of the Panel said: "The priority sectors are the areas in the economy that are currently under strain. We are shifting the emphasis away from the FTSE 350 towards the mid-tier companies where risk is seen to be greater. Recent Panel reviews have shown that compliance is good at the top end of the listed market." Read more to topEvents Housing Market IntelligenceWednesday 15 October - Savoy Place, LondonThe annual Housing Market Intelligence conference is the house building industry's leading event for discussion of the strategic and macro issues facing house builders and is a must for anyone involved in the business of house building.For further details please contact the events team on 020 7960 1646 or events@hbmedia.co.uk Housebuilding Innovation Awards 2008Thursday 23 October - Millennium Mayfair Hotel, LondonNow in their fourth year, the Awards have become firmly established as the most coveted accolade in the UK house building industry. These awards recognise innovation among house builders and their suppliers in categories including ‘best sustainability initiative', ‘best innovation in technology' and ‘best initiative to first-time buyers/ key workers'. The glittering black tie event will this year be hosted by John Humphrys and takes place on 23 October in London. For further information visit www.hbmedia.co.uk or take advantage of the early booking discount before 22 August, by contacting the events team on 020 7960 1646 or events@hbmedia.co.uk. to topHBF Technical ConferenceWednesday 12 November, University of YorkThis year has seen the Government propose major changes to the way that Building Regulations are enforced. With many regulations under consultation, it is important to keep informed of current and future legislation. The morning section of the conference will provide delegates with up to date information on Parts G & L, the Code for Sustainable Homes as well as examining the future direction of travel for building regulations.The afternoon is to be devoted to the delivery of Zero Carbon Homes with the agenda to be set by the new Zero Carbon Hub. For further details please contact the events team on 020 7960 1646 or events@hbmedia.co.uk For other HBF events visit the website http://www.hbf.co.uk/index.php?id=eventsandmeetingsFor HBM events visit http://www.hbmedia.co.uk/ to topRosie HinchliffeView Previous Weekly News Summary
