Monday property news update - 10 May
A new overhaul of planning, the homes supply crunch and pressure builds in construction supply chains
4 minutes to read
Homeownership
A planning bill set to be included in tomorrow’s Queen’s Speech will aim to simplify the planning process and make it more difficult for existing homeowners to block new housing projects, according to the front page of the Times this morning.
The nation will be zoned as part of the plans, with some areas marked for "growth" and others marked "protection". Ministers are still deciding on whether "regeneration" will be a third category, according to the piece. The proposals are written up as a plan to boost homeownership, however homes, shops and offices will be given automatic planning approval in "growth" areas . Development will be restricted in "protection" areas, but not ruled out.
Interestingly, the government believes rates of home ownership played a key role in the Conservative Party's gains in the local elections last week. Resolution Foundation analysis suggests 54% of people in the seats won by the Conservatives at the 2019 election owned their own homes. In Labour constituencies, that figure is 43%.
As with all new policy, the details matter, however the sentiment is likely to be welcomed by developers. Land shortages and planning delays currently top the list of barriers to delivery faced by UK housebuilders, according to our survey of nearly 50 developers published last month.
The commodities crunch
Delays in supply chains and soaring materials costs look set to be a drag on delivery over the coming months. A new Purchasing Managers Index from IHS Markit suggests the construction sector is experiencing its strongest growth phase for six-and-a-half years, with the recovery balanced between the housebuilding, commercial and civil engineering categories.
The rate of cost inflation has now picked up for seven consecutive months to the highest point since the survey began almost a quarter of a century ago. Meanwhile delivery times from suppliers during April lengthened at the third highest rate on record, bettered only by the first two months of lockdown last spring.
Activity isn't slowing either. More than half of the survey panel (57%) expect a rise in business activity during the next 12 months, while only 7% forecast a decline.
This is a UK survey but the theme will be replicated in global housing markets amid a surge in demand for the raw materials needed to fuel the recovery. Iron ore futures in Singapore surged 10% in a matter of minutes overnight, driven by demand in China. Copper is now at $10,500 a ton.
The supply crunch
UK house prices climbed at their fastest pace since February 2004 last month in-part due to a shortage of supply of homes for sale, see this note from April 30th. In a new Property Market Outlook, published this morning, Tom Bill finds shortages are more pronounced in some areas than others.
Shortages were most acute in the South West, East of England and East Midlands regions, according to our analysis. The South East and Yorkshire & The Humber follow closely behind.
London is the only region in which levels of supply remain comparable to pre-pandemic norms. The capital, which has a high proportion of flats, has not benefited in the same way as other regions from growing demand for outdoor space and greenery. The fact supply hasn’t fallen versus demand to the extent it has in other parts of the country also reflects ongoing affordability constraints.
“The regional discrepancies in supply show this is a pandemic-related issue rather than anything deep-seated,” according to Tom. “The property market will undergo a period of adjustment as supply and demand normalise, which means the second half of this year is unlikely to bear much resemblance to the first half.”
A brighter European outlook
After a lacklustre start its vaccination campaign, the European recovery has so far looked underwhelming compared to growth rates in the UK and the US. The outlook is now shifting as EU member states firm up plans to spend chunks of the €800bn recovery fund.
The European Commission is set to publish its economic outlook tom Wednesday and the update is likely to include spending plans that were omitted during the last round due to a lack of available detail, according to the FT. Morgan Stanley estimates the EU project will boost eurozone gross domestic product by 3.5%.
The biggest uncertainty, according to the US investment bank, is how effectively the money will be spent, and in the six years to 2020, EU countries on average only spent about half the money they were allocated by Brussels. Wednesday's update may include new EU forecasts for growth, which currently stand at 3.7% in 2021 and 3.9% in 2022.
In other news...
New analysis from Stephen Springham finds consumers have returned to retail destinations in significant numbers since stores re-opened, but there has been an inevitable slight dip after a strong initial surge - there is still some way to go before we can call it a recovery. Meanwhile, in a new Rural Update, Andrew Shirley looks to Australia, where farmers are making big money out of pioneering deals selling soil carbon credits to the likes of Microsoft.
Elsewhere: booming Scottish finance industry wrestles with rising prospect of another referendum, the third runway moves a step closer as Heathrow starts buying houses, UK jobs market hits full throttle as lockdown eases, the mystery of the underwhelming US jobs report, and finally, the CBI says regional productivity must rise.
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