Lunchtime news Wednesday 15 October 2023

House building targets to build three million new homes by 2020 are ‘under threat’ or ‘very, very challenging’ because of the credit crunch according to the director of housing and planning at Communities and Local Government; while new housing minister Margaret Beckett has rejected calls in parliament for the government to embark on a new programme of council house building. Ms Beckett said the extra accommodation needed did not have to be provided in the form of council houses, although ‘we will be happy to see a greater expansion and provision by councils’. She also refused to remove the right to right to buy.

Sale and rent back schemes, first criticised in ROOF November/December 2007, need to be more tightly regulated to protect homeowners, the Office of Fair Trading (OFT) reported yesterday. The report, the culmination of a five-month inquiry, called on the Financial Services Authority to improve transparency in a market. Around 1,000 companies who complete a total of 50,000 sales worth an estimated £2.5 billion are now involved in the industry. Only a tenth of the companies are members of a trade organisation. The National Landlords Association said there was a place for the ethical use of the schemes, however Shelter has called for the prosecution of rogue companies.

Town hall officials will meet with ministers today to discuss the help available for 116 councils affected by the collapse of the Icelandic banking system. The Local Government Association (LGA) confirmed yesterday that the 116 councils had invested more than £850 million in the banks, leading to fears of an increase in council tax, service cuts and missed wage payments. The government has set up a unit to help any local authorities in severe difficulty, however, it says that none of the affected councils appeared to be facing ‘serious imminent liquidity problems’. The LGA is demanding an enquiry into why credit ratings agencies continued to rate Icelandic banks highly just days before they collapsed.

Gordon Brown’s claim, reported yesterday in ROOF that the UK would not suffer a housing market crash as bad as that in the US or Spain because it had not overbuilt, came under attack from the Royal Institution of Chartered Surveyors, who said there had been huge amounts of overdevelopment in parts of the country and pointed to the flood of empty flats in most city centres. Some experts agreed that planning controls had been tighter in the UK than many other countries, and pointed out that there is an undersupply of houses in London and the South East, but said this did not mean there would not be a crash.

House prices will fall by a further 10 per cent before the market begins to stabilise, a Treasury select committee was told yesterday. People’s expectations of what house prices would do, was now a dominant factor in the market, probably even more important that the availability of mortgage finance. The report expects house sales to pick up again ‘quite sharply’ once the market has bottomed out.

This is better news than that of another academic, who says the average price of a house in the UK will not return to its 2007 peak until 2023. Using figures based on the Halifax house price index the report calculated that in 2010 the average will be 40 per cent lower than the peak of prices in August 2007 and would not recover for a further 13 years. It was ‘very bad news’ for anyone who had bought a property in the past year and predicted that negative equity would be a big feature of the economic landscape for years to come. However, properties would become more affordability as prices fall.