England may not have won the World Cup this year, but the UK has surely won the ‘Best Summer for Years’ award, as the country continues to bask in almost wall to wall sunshine, taking those of an older generation back to 1976, when we last had such prolonged hot and dry weather.
For buyers looking to purchase a new home, one thing that’s not standing in their way now is the cold and the rain, but there are perhaps other more constraining factors.
One can only speculate how much better the country might be performing if Brexit wasn’t now overshadowing the political and economic backdrop, though indications for Q2 are certainly stronger than for Q1. It is pleasing to see sales of new build homes holding up well for the first six months, so far unaffected by what the deputy governor of the Bank of England, Sir John Cunliffe, called the “very material uncertainties for the UK economy” created by Brexit.
However, not unreasonably, private housebuilders have their own agenda at difficult times such as these, and the pinch points of affordability may be coming more and more into play.
To emphasise the point, in its latest resulst Persimmon increased their unit completions in the first half of this year, selling 278 more homes than the same period in 2017, a healthy 3.6 per cent uplift, with an average selling price at an affordable £216,000.
At the other end of the affordability scale, Berkeley Homes sold 370 fewer homes in their full year to April 2018, a fall of 9 per cent over 2017, at an average selling price of £715,000. There are of course many other factors affecting these two examples, but for the next eight months, until our proposed leaving date from the EU, the impact of Brexit will be key to house builder strategies, particularly as the annual rate of house price growth in the UK has slowed to a five year low of 2 per cent, according to the June research from Knight Frank.
One announcement keenly awaited from the Ministry of Housing is the future of the Help to Buy equity loan post March 2021.
Given where we are in the calendar the smart money is for this to form part of the November Budget speech, and the industry remains positive that the scheme will be extended in one form or another.
It is therefore pleasing to report that more and more lenders are now seeing a new customer cohort to target, those Help to Buy customers coming off their five-year interest free loan period, and either seeking a replacement of their first-charge mortgage or looking to fully redeem the equity loan.
There are now over ten lenders that will consider a remortgage of the equity loan in full to 90 per cent LTV, whilst one or two building societies will consider 95 per cent LTV. For those borrowers looking to use the one-time staircase facility however, options remain very limited.
Recently, I attended a lively discussion group looking at standards in housing, and the likely direction of travel for Modern Methods of Construction in residential housing. This is probably the most complex subject facing us today in terms of rapidly increasing the housing supply. But all parties need to have full confidence in these new build constructs, be they builders, lenders, valuers, insurers, or warranty providers.
The Ministry of Housing has set up a working group for MMC looking at the assurance, insurance and finance aspects, under the chairmanship of Mark Farmer, chief executive of CAST Consultancy, so it was good to hear how he is looking at setting a unified approach for the industry, refining terminology and building evidence as to what MMC really looks like and how it performs.
But this subject is not solely an esoteric one for our industry, Grenfell has seen to that. Greater transparency is now required from all parties, ensuring the home buying customer has the confidence of longevity in the construction and a clear understanding of the building warranty cover that comes with each property.
As Mark Farmer has said, “there is a big opportunity to address what is quite a disparate warranty market, bringing it onto a level playing field through a protocol for warranty providers. A protocol would also be a barrier for entry for poor warranty providers and manufacturers.”
James Chidgey is new homes relationships manager at Mortgage Advice Bureau