Monday, 21 October 2013

Help to Buy: housebuilders and homeowners benefit...

Prospects look good for the major UK housebuilders:

Persimmon boosts FTSE 100 as Goldman upgrades housebuilders

October 09 2013, 1:42pm
Persimmon boosts FTSE 100 as Goldman upgrades housebuilders

Housebuilders helped to construct a recovery from early falls from London’s stocks thanks to a bullish note from heavyweight US broker Goldman Sachs.
Goldman said the housebuilding sector had been boosted by the Help to Buy scheme, which was launched to inject life into Britain’s ailing house market.
There were concerns the government’s mortgage lending scheme would create a housing bubble, dragging housebuilding shares lower. But Goldman shrugged off these claims in Wednesday’s research.
The US broker now forecasts a quicker UK housing market recovery, and expects transaction growth of 15% per annum between 2014 and 2016 (from 10%/10% and 6% respectively, previously) and house price inflation of 6% per year against 4% previously forecast.
Persimmon (LON:PSN) was displaying strong gains on the back of the note, up 6% at £11.41.
Its target price was given a 2% lift to £18.54, suggesting there is still some way for Britain’s biggest housebuilder to rise yet.
There were also significant advances for rivals Barratt Developments (LON:BDEV) and Bovis Homes (LON:BVS), which were upgraded to ‘buy’ from ‘neutral’, and Taylor Wimpey (LON:TW), which joins the broker’s conviction buy list.

Persimmon is a major land-holder around Sidmouth:

The East Devon District Council Consultation New Local Plan 
Draft Strategy 1, 2 and 21 
Representations by WYG on behalf of Persimmon Homes (SW) Ltd 
Land west of Woolbrook Road, Sidmouth 


1.1 Persimmon Homes (SW) Ltd 
These representations are submitted on behalf of Persimmon Homes (SW) Ltd to respond to the new East Devon Local Plan, hereafter referred to as the New Local Plan. 

Persimmon Homes have an interest in land at Woolbrook Road, Sidmouth. Planning Permission has recently been granted for 100 dwellings on land to the north east of Woolbrook Road. As part of the latter approval, land to the south west of Woolbrook Road was identified and transferred to Devon County Council to provide a site for a park and change/ride facility. A site location plan and concept layout plan for a park and ride facility is enclosed.

And other house-builders are doing well:

There are concerns that those targeted with the 'help to buy' scheme are not in fact benefiting:

October 10, 2013 7:25 pm

Buyers beware of Britain’s absurd property trap

Martin WolfBy Martin Wolf
The government’s Help to Buy scheme is really helping those who wish to keep housing costly
The British are not a nation of shopkeepers, as Napoleon said, but rather one of property speculators. This is why a government notionally devoted to fiscal austerity has decided to use its balance sheet, up to £130bn (8 per cent of gross domestic product), to guarantee mortgages as part of its “Help to Buy” scheme. The government claims it is helping first-time buyers. It is really helping those who wish to keep housing costly: today’s owners, banks and housebuilders. The government is strengthening a conspiracy to keep house prices exorbitant.
The scheme has two parts. The first is for the government to finance a share in the equity. Under this, it will advance up to 20 per cent of the price, allowing buyers to put up a mere 5 per cent deposit on new properties worth up to £600,000. The cost of this scheme is expected to be £3.5bn and it is intended to help 80,000 buyers of new homes. The second part consists of mortgage guarantees – the UK equivalent of Fannie Mae and Freddie Mac in the US. The state would guarantee lenders up to 15 per cent of the value of a loan on properties worth £600,000, or less. This would cap the risk to lenders at 80 per cent of the value of a property, even if they lent as much as 95 per cent.
David Cameron, prime minister, justified the new schemes as a way to correct a “banking failure” that had resulted in lenders wanting large deposits. Is this a market failure? No, it is mere prudence, particularly when house prices are so high. Note, too, that the scheme helps not the poor, but the cash-limited. Even at a ratio of six to one, the household income needed to afford a 95 per cent mortgage on a property worth £600,000 is £95,000. This is well over twice the average income of a two-earner household.
As a way of solving the problem posed by high prices in the prosperous regions of Britain, a policy of increasing demand is absurd. It may increase supply a little, but only by raising prices still higher than they would otherwise be. If one wanted to increase supply, the solution is evident, but politically unthinkable: make a large quantity of land available for development and impose a swingeing site value tax, to compel building. Back in the 1970s, the UK built an average of 300,000 houses a year. But between 2001 and 2011, building averaged 188,000 a year, even though the population rose by some 3.5m.
It is the supply, stupid! The reason this point is not made the focus of policy is that doing so would be too unpopular and too dangerous.
It would be too unpopular because of stout resistance from the Nimby – “not-in-my-backyard” – brigade. The Campaign to Protect Rural England or, as I think of it the “Campaign for the Imprisonment of Urban England”, would be up in arms. So too would owners of “land banks” available for building and today’s homeowners. These lobbies are far too formidable for any government. It will not tackle them. The government initially broached liberalisation of the UK’s exceptionally tight restrictions on land use, but achieved little.
Liberalisation would also be risky because it might threaten the stability of UK banking. In a brilliant lecture on money and banking delivered last month, Lord (Adair) Turner, erstwhile chairman of the Financial Services Authority, noted that the lending of UK banks mainly supports the purchase of existing properties. In 2009, an amazing 64 per cent of all bank lending was for residential mortgages. Close to 13 per cent was for commercial property, 12 per cent was for unsecured personal lending and a mere 12 per cent was for other corporate lending. In all, property-related lending accounted for 76 per cent of total loans
Yet remarkably, between the third quarter of 2007 and the second quarter of 2013, only 4.4 per cent of the total of £80bn in write-offs by UK banks and building societies was on loans to individuals secured on their houses: these loans were as safe as houses. A big reason for this was that – unlike in Ireland, Spain or the US – the post-crisis fall in house prices in the UK has been so modest. In August 2013, real house prices in England and Wales were just 15 per cent lower than at their pre-crisis peak and 140 per cent above their mid-1990s trough. Moreover, the constraints on supply that have kept prices up also curbed the pre-crisis building boom. Its egregious supply constraints actually saved the UK.
A deregulated and dynamic housing supply could spell financial and political Armageddon. The victims of this vile system are the young and upwardly mobile, who are either unable to buy at all or are trapped in a lifetime of debt serfdom. The political genius of the scheme is that it appears to help these hapless victims, while in fact helping the usual suspects: banks, homeowners, Nimbys and, if it creates another housing boom, the government.
Ministers also pretends the guarantees are a purely temporary arrangement. Nothing is less likely: it is the temporary that endures. The government has increased its commitment to frighteningly expensive housing. It is a trap from which the UK may not now escape.

October 11, 2013 4:39 pm

The great UK housing divide

By Kate Allen
The economic downturn of recent years has been good to middle-aged homeowners.
The low base rate of interest has pushed down mortgage interest payments, freeing up cash to pay off home loan balances or stash in savings accounts. And banks have concentrated on using their limited available mortgage funding to lend to equity-rich homeowners, pushing aspiring new buyers out of the way.
As a consequence, cash buyers make up a record share of transactions.
Meanwhile, house prices, which recently topped their previous 2008 high, have helped those looking to downsize to convert housing equity into retirement cash. And the Conservative party has seen off attempts to introduce a “mansion tax” on wealthy homeowners – though the threat could be resurrected by the winner of the next general election.
Lucian Cook, director of residential research at estate agent Savills, said: “The more affluent, older generations who have got lots of housing equity have been able to remortgage and lock into low interest rates, which has reduced their housing costs.”
Large deposits make home ownership harder to afford
Younger people on lower incomes have developed a major housing headache in the past few years – provoking the government to launch its £12bn Help To Buy mortgage guarantee scheme this week.
Home ownership has become harder to afford than ever before, thanks to the large deposits being demanded by mortgage lenders. Meanwhile landlords have taken advantage of their captive market to raise rents regularly. Rents in England have risen 3.3 per cent in the past three years while real wages fell 8.5 per cent, figures from the Office for National Statistics show.
Lucian Cook said: “New entrants to the mortgage market face higher interest rate costs and find it harder to get a deposit than older, equity-rich homeowners. More young people have been pushed into the rented sector, which has driven up rents and widened the polarisation in the UK housing market.”
This is precisely the group of people that the Help to Buy scheme is aimed at. But critics fear it will boost house prices; others have argued that it does not do enough to make home ownership affordable.

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