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There is now a very real chance that Taylor Wimpey, the UK's largest housebuilder by production, could become the first builder to fall victim to the credit crunch.

Created from a merger of Taylor Woodrow and Wimpey just a year ago, the company has stolen the dubious mantel of housebuilder most likely to collapse from Barratt Developments, after it revealed today that it had failed to secure between £400 million and £500 million of new funds from investors.

In theory, Taylor Wimpey has plenty of time to sort out its balance sheet, as it is not in danger of breaching covenants on its £1.7 billion debt until February. In the meantime, short-term cash flow is good and the company has taken tough measures to make sure it stays that way by closing a third of its offices and almost a fifth of its staff.

Full Story at Times Online

Labels: Barratt Developments, Housebuilders, property analysis, property development, Residential property, Taylor Wimpey

The scale of the problems facing the building industry was underlined yesterday when new figures showed British construction activity fell at its fastest rate in 11 years in June.

The Chartered Institute of Purchasing and Supply's construction PMI index fell for the fourth straight month to 38.8 from 43.9 in May - the weakest reading since the survey began in 1997. The housing sub-index was also the lowest ever, falling to 25.6 in June from 32.7. A score below 50 indicates a contraction.

"Housing bore the brunt of the credit crunch fallout, reflecting the steep decline in new housebuilding," said Roy Ayliffe of CIPS.

Housing minister Caroline Flint, who will publish a package of rescue measures this month, is trying to salvage the government's commitment to build 3m homes by 2020.

She said reforms would allow the Housing Corporation to pay 80% upfront to developers, rather than the current 50%, before work starts on housing projects. This would enable the corporation - a government agency overseeing social housing projects - to increase the pace of approvals and deliver much-needed affordable housing while supporting developers.

She said a national clearing house was being set up so housebuilders could approach the corporation with proposals to sell their unsold stock for affordable housing. The government has committed £200m for the purchase of unsold stock from housebuilders, which could then be used for social or affordable housing. The clearing house would give developers an indication of their chances of the social housing sector buying the unbuilt property.

She also said a further £270m from existing budgets would allow the corporation to provide an extra 3,800 homes for social rent and 1,500 shared ownership homes over the next three years.

Flint hopes the measures will prepare the industry for an upturn in a year or two year's time, as well as enabling councils to use their resources to keep the housebuilding programme going. The government's advisers - the National Housing and Planning Advice Unit - warned at its annual conference that even if house prices fell by 5% to 10%, there would still be an affordability crisis.

The government's targets for housebuilding have been fiercely criticised by regional assemblies for their lack of realism. For example, 49,700 new homes a year are proposed for the south-east compared with 28,900 planned.

But Flint said: "There is an overwhelming case for building more housing and we must remain as ambitious as possible. But ... we have to acknowledge not only the difficulties faced by individuals and families, but by housebuilders too."

A spokesperson for Shelter said: "This package gives the building industry a much needed kick-start."

Read more at Guardian Business

Labels: Housebuilders, property analysis, property development, property prices, Residential property, uk housing

The Carsberg Review of Residential Property should be the basis for major reform of the residential property sector, says RICS (Royal Institution of Chartered Surveyors).

In particular RICS endorses the view that consumers should be central to any reform, with emphasis placed on providing better information and basic protections for any person buying, selling or letting property.

Sir Bryan’s review highlights three key issues that should be the foundations for reform:

1. The property transaction process and the provision of information for consumers need revision – Home Information Packs (HIPs), introduced in England and Wales, have not improved the process as intended.
2. Regulation and redress schemes need to be consistent with universal participation - the current regime of voluntary regulation and redress is insufficient.
3. Consumer interests need to be at the heart of all policy making

Citing research from Which?, the OFT and ComRes* - all of which confirm that significant levels of dissatisfaction exist amongst buyers and sellers of residential property - Sir Bryan concludes that the current transaction process is unsatisfactory for those who use it.

He also states that those who offer estate and letting agency services to the public, must be qualified and properly regulated.

Lack of knowledge of the systems and frustration with processes are driving dissatisfaction, says Sir Bryan, and both are areas RICS is keen to see addressed.

Speaking at the launch of the independent report, Gillian Charlesworth RICS Director of External Affairs emphasised the value of taking steps now.

"Sir Bryan’s review highlights a number of key areas where the current approach is clearly failing.

"The processes for regulation and redress do not go far enough to protect the consumer and we agree that participation in regulatory and redress schemes needs to be both consistent and universal.

"They should include all estate agents, letting agents, managing agents and landlords.

"The Industry itself is already coming together to tackle these issues, through the creation of the Industry Standards board, however there are limitations as to what this voluntary approach can achieve.

“It is important that we all take steps now to make the necessary improvements.

"We need action not words. Government needs to acknowledge this, deliver its support for Industry action and do more to protect the public."

RICS will now undertake an in-depth consultation with the aim of developing a formal response to Sir Bryan’s recommendations.

"We remain committed to building a coalition that can deliver property policy reform", concluded Charlesworth.

For more info visit RCIS

Labels: RCIS, Residential property, Sir Bryan

Homeowners have started to drop their asking prices as the reality of the downturn in the housing market hits home, a report out today shows.

The property website Rightmove said the average house price fell 1.2% to £239,564 in June, from £242,500 in May, and further reductions would be required to sell homes where there was an oversupply. It suggested what buyers could afford would continue to deteriorate because of rising living costs and higher mortgage rates due to the credit crunch.

Miles Shipside, commercial director of Rightmove, said: "For most sellers that will mean whatever they thought of asking for their property at the peak of the boom, they need to take at least 10% off. Otherwise their property will stagnate.

"In spite of the lowest housing transactions for 30 years, new sellers had been coming to the market asking record prices. It was a mad state of affairs that defied the laws of economics. Thankfully, new sellers are now taking some proactive steps to price more realistically from the outset to attract increasingly hard-pressed buyers."

The biggest drop in house prices was in the south-east, where they dropped 2.4% to £303,828 in June. In the south-west they decreased 2.2% to an average £258,696. Prices fell 1.6% to £225,565 in East Anglia and 1.4% to £399,010 in Greater London.

Although asking prices rose in the north, the West Midlands and Wales, these areas have seen some of the steepest price falls in previous months, with average asking prices 3% lower in the West Midlands than they were a year ago, and 2.6% lower in Wales.

The lack of buyers is widely blamed on tighter mortgage lending conditions.
The Council of Mortgage Lenders said that lending almost halved during the first quarter of 2008, resulting in 142,300 mortgages.

Halifax, Britain's biggest mortgage lender, announced last week that it would raise its fixed rates on loans by half a percentage point - the 20th time it has changed its rates since the start of the year.

Homeowners who have more than 25% equity in their houses 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 rivals in the past week, including First Direct, which raised what had been the cheapest fixed rate on the market.

The number of properties for sale in the UK now outweighs the number of buyers by over six to one. There are 25% more properties on the market than six months ago, which means that 1 million sellers are competing for just 150,000 buyers.

Average unsold stock per agency branch rose to a record 75 homes, up from 73 the previous month.

Rightmove used the asking prices of up to 200,000 properties for its figures.

Read more at Guardian Money

Labels: House market, House prices survey, property prices, Residential property, Rightmove