Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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January 30, 2023

Mortgage affordability most stretched in London, least in Scotland, Nationwide | Gove gives developers six weeks to sign cladding contract or face ban | Hunt gives Euston the HS2 green light

Company news

Civitas Social Housing (CSH, 54p, £329m)

Care-based social housing REIT, providing homes for working age adults with long-term care needs. Trading: “At the interim results on 6 December, the company noted that it had experienced net rental uplifts in the six-month period to 30 September of 6.0% and that further growth in rents was anticipated in the remainder of 2022 and 2023. We are pleased to note that, as expected, this trend has continued in the same manner in the three-month period to 31 December when net rental uplifts have been achieved at a similar level to those reported previously. The current level of CPI inflation is not expected to change our overall view of the current trendline in the Company’s rental growth.

Outlook: “The company’s business model and portfolio has always been directed to support the delivery of high levels of care for vulnerable individuals in bespoke, adapted care-based housing. We do this in a granular manner, drawing on the in-house expertise of managers experienced in housing benefits, property management and care management. The Board has noted the recent share price weakness and along with Civitas Investment Management continues to actively explore opportunities to preserve and enhance value to shareholders”. Net asset value published, 8 February.


Economic data

House prices. High house prices relative to average earnings continue to make raising a deposit a significant barrier for first time buyers (FTBs), according to the Nationwide’s Affordability Report. The mortgage lender estimates that FTB mortgage payments, based on 80% loan-to-value mortgage, account for 39% of average take-home pay, close to the levels seen in the run up to the financial crisis (below, left Affordability remains most stretched in London and south of England; the North & Scotland remain the most affordable regions (below, right) ). In 2021-22, around a third of first time buyers had some help raising a deposit, either in the form of a gift or loan from family or a friend or through inheritance – up from 27% in the mid-1990s. For the average FTB in each region, those in Scotland face the shortest time to save a 20% deposit, c. six years, while London takes the longest, over 15.

First time buyers mortgage house prices

In other news …

Cladding remediation. Levelling up Secretary Michael Gove has set six-week deadline for developers to sign a government contract issued today committing them to remediate towers with unsafe cladding, warning that any house builders and failing to sign the contract would be banned from the market. ( Volume house builder Persimmon is the first to sign, with Barratt expected to follow suit today; around 49 of the country’s leading developers have pledged to fix their own buildings, which will now be turned into legally binding commitments. The remediation contract requires developers to fix buildings and reimburse taxpayers, with an estimated £2bn expected to be committed to fund repairs. Legislation will be brought forward in the spring introducing fresh powers to prevent developers from operating freely in the housing market if they fail to sign and comply with the remediation contract. This means that together with the Building Safety Levy, industry is directly paying an estimated £5bn to make buildings safe. The contract also requires developers to reimburse taxpayers where public money has been used to fix unsafe buildings.


Infrastructure. The Chancellor on Friday quickly scotched a report in that morning’s Sun, that HS2 could terminate in Ealing rather than Euston Station, as one of a range of options being considered to curb cost inflation (BBC): Jeremy Hunt said he did not “see any conceivable circumstances” why it would “not end up at Euston”.

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