Housing next to the rescue

ONE of the more ominous numbers in the ImF’s report on Britain is the suggestion that on some measures house prices still have 10pc to 15pc to fall.

If values were to fall by that amount then it would be a massive problem for our high street banks, as it would push households up and down the country into negative equity and might force already capital-constrained banks to recognise the losses.

What the ImF’s analysis does not seem to recognise is another phenomena. The surge in population, particularly in the more prosperous south East of the country, is leading to housing shortages.

This at a time when the royal Institution of Chartered surveyors notes that house building fell off a cliff in the second quarter.

private house-builders, that have been doing well commercially, were also much less confident about prospects in the same period.

The Treasury is starting to recognise that it cannot allow residential construction, one of the big drivers of growth, to slow, no matter what the ImF may say about future house prices. It is planning a major push in september designed to put some muscle behind new homes.

In much the same way as it is seeking to deploy Britain’s strong credit rating in advancing infrastructure projects, it is also seeking to force the pace of residential development. Chancellor George osborne is looking at providing government guarantees for private sector financing in two areas.

Firstly, in the private residential sector. people are buying houses later in life because of other financial obligations and the difficulty in saving the higher deposits required since the banking crisis.

so helping to promote a vibrant and modern private rental sector is seen as important.

secondly, the housing associations, these days the main source of social housing, have a number of projects in the pipeline. There is increasing interest in this area from pension funds and the City, with m&G among others putting together social housing funds.

again the Government is prepared to use the uK’s aaa credit rating to get behind some of these projects.

The disappointment in the Government that the growth it had hoped for when it first came to office is causing a carapace of gloom.

In the 1930s a large-scale housing programme both created jobs and was good for social cohesion.

It looks as if ‘plan a’ is to get its third plus mark in as many weeks: funding for lending, infrastructure and next housing. about time too.

Romney rattled

prIVaTE equity will never be popular, as republican presidential candidate mitt romney is learning. In the boom years, private equity was driven out of Germany after ministers decided they were locusts preying on the country’s industrial base.

here in Britain, Blackstone found itself in bad public odour for walking off with a £600m profit from selling southern Cross shortly before the financial crisis brought the company crashing down.

It was inevitable that romney would be targeted by the Democrats. Long before he captured the republican nomination, I was told by friends in Washington that an enormous amount of work was going on tracking the deals that romney had been involved in and the numbers of workers they had put on the scrapheap or replaced by outsourcing.

None of this is surprising, it is what private equity does.

The difference is that in the current post-Great panic years, private equity investors are finding it much harder to dispose of assets because of the sick state of share markets.

There is also a suspicion that by the time that private equity has finished with most enterprises there is not much meat left on the bone.

all of this is proving tricky for romney, having made his fortune out of Bain Capital.

But no one should be too dismissive.

at a time when america is facing the so-called fiscal cliff – a budget deficit that has already cost the country its aaa credit rating – a scrap of private equity nous, the ability to know how to cut the size of government and how to outsource if necessary, could be just what the public sector ordered.

as uK borrowing spirals – it was at £14.4bn in June – maybe George osborne should be putting some of that Blackstone wisdom to work.

Dutch courage

muCh moaning among sports fans that there is no British beer brand among the olympic sponsors.

That is largely because heineken, that together with Carlsberg, bought scottish & Newcastle in January 2008 for £7.8bn, won the sponsorship contract.

Now heineken is back on the takeover trail offering £3.3bn for the minority stakes in asia pacific Breweries, the maker of Tiger beer.

ownership clearly matters to the Dutch brewer.