No Of New Houses Being Built Plummets Nearly 60%

[doh]

http://www.guardian.co.uk/business/2008/ju...consumeraffairs

The number of new houses being built has plummeted by nearly 60% since this time last year as tighter mortgage lending conditions put off potential home buyers.

The National House Building Council, which has 20,000 registered house builders on its books, said there were 6,890 new starts in the private sector in May, compared with 15,713 this time last year. This represents a drop of 56%.

The number of new public sector houses being built is also decreasing with 2,699 houses being built this year, compared with 4,306 in May 2007. Sixty percent of social housing is built by private developers.

This news came on the same day as Halifax, the UK's biggest mortgage lender, announced that it would be raising its fixed rates on loans by half a percentage-point from today - the twentieth time Halifax has changed its rates since the start of the year.

Homeowners who have more than 25% equity in their houses now face an increase on a two-year fixed-rate mortgage from 6.49 to 6.99%. On a £150,000 home loan, this adds £47 a month to repayments.

The increase follows similar moves from several rival lenders in the past week, including First Direct which raised the cost of what had been the cheapest fixed rate on the market.

Roger Humber, strategic policy adviser to the House Builders Association, said the results were "not surprising".

"We've seen an enormous downturn with the rate of sales falling 60% year on year. The issue is not the lack of demand but an absolute lack of mortgages.

"Until the credit crunch is resolved by a reopening of the wholesale markets which banks rely on, we've got to see a continued low level of house building. Home building levels have got to come down in line with sales."

Joey Gardiner, housing and regeneration editor at trade publication Building, believes that this data shows how far away the government is from meeting its target of building 2m homes by 2016. "This is the danger from expecting the private sector to deliver public policy aims for you – they won't do it if it can't make them any money. Builders won't build if potential buyers are consistently refused mortgages for new homes.

"The government also needs to worry about what will happen when the market does finally turn round, but it finds thousands of builders have been laid off, and the industry no longer has the workforce in place to start building again."

Several home builders are struggling to survive the credit crunch and their shares have been battered by speculation about the state of their finances and the housing market. It emerged today that Barratt has struck a deal with its banks to give chief executive Mark Clare more time to improve the his firm's fortunes.

Building magazine said an agreement had been reached to waive a clause that could put debt-laden Barratt in breach of its banking covenants following a land valuation write-down later this year.

Shares in the company jumped more than 20% on the back of the news.

Quoting a source close to the negotiations, Building said the waiver centred around the firm's asset cover covenants, which govern the ratio of debt to net assets. This is thought to be 85%, and analysts have forecast it is likely to be breached following a hefty write down in the firm's £5bn land bank.

The waiver will remain until Barratt has repaid £400m that was borrowed to fund last year's £2.2bn acquisition of Wilson Bowden, Building said. It has until 2011 to do this, the report added.

Other building companies are having to scale down their operations as they struggle to keep their heads above water. Countryside Properties plans to cut its development programme in half in the north of the country. Persimmon, another housebuilder, said in its interim trading statement recently that it had stopped building on any new sites.

Many of the big players are slashing jobs. Redrow announced 200 redundancies and Bellway cut 320. Kier plans to close two regional offices in Lincolnshire with the possible loss of 90 jobs and Taylor Wimpey will cut 600 staff. David McClean recently made 30 staff redundant, which is a tenth of its workforce.

"The issue is not the lack of demand but an absolute lack of mortgages."

I think the issue is actually that there is a lack of demand at the prices the housebuilders want, and need, to charge because they massively overpaid for their landbanks.

There's only two ways out of this I can see...

1) The banks start to lend recklessly again.

2) The landbanks get revalued and housebuilders either go bust and auction off their land or they survive and base their prices on the revalued land.

It seems the housebuilders are in denial that it's going to be option 2.

[Faithman]

A reduction in the massive local council tax increase over the last few years is the real need.

One poster calculated this to be 75% of the gross profits.

Generally:

need to provide a proportion of new builds as social housing

need to pay for new roads and local amenities

need to pay ....

[CrashedOutAndBurned]

Yeah, but there's a massive shortage of new homes, which is the reason prices are high. People should be chomping at the bit to buy these boxy flats.

British builder expect profits three times those of dutch builders. If they got real and stopped selling tiny 205k shoe-boxes for 250k and building more spacious homes for much less they could carry on building.

[AwaitingFairPrices]

I have a friend who owns a roofing company. He's been raking in the money over the last 6 years and been very sensible with his money in terms of preparing for future.

Had a good chat with him this morning, and Barratts have notified them that once current batch of housebuilds are completed, they will be started no more developments until further notice! This affects Southern Central coast of England and Isle of Wight.

I was quite shocked as this included developments that are not even completed. They are to just to do roofs for any houses finished or already in progress and then that's it

He now thinks he will be laying off some of his subbies as no additional working waiting to replace what's being lost.

Rising unemployment here we come.

AFP

[blankster]

A local site owned by one of the other big builder PLCs seems to be grinding to a halt. It's about 30% complete. A few weeks ago the slabs were completed for the next stage but that seems to have been stopped. Instead a handful of workers are putting in kerbs and tarring the footpaths around the slabs.