Despite political upheaval, new-build continues to attract buyers with options and incentives not available elsewhere
The general election on 8 June divided the popular vote more starkly than any election since 1974.
Back then, first Harold Wilson and then James Callaghan led a Labour government with no overall majority; and, in the midst of industrial strife, the Callaghan government fell in March 1979 on a vote of no confidence, by just a single vote. The Sun newspaper’s headline, ‘Crisis? What crisis?’, paraphrasing comments by Callaghan and which helped seal his fate, may have come from the prescient title of a Supertramp rock album launched a few years earlier.
While there is no serious industrial strife today, the backdrop of Brexit is beginning to feature heavily, as we heard in last month’s Queen’s Speech. Even with the support of the Democratic Unionist Party providing a working majority for the May government, political life now will not be straightforward.
For those of us working hard to ensure buyers obtain their new home – for the first time or as movers, through either a straight mortgage, a Help to Buy scheme or a shared ownership model – we can still expect to be very busy. The appeal of new-build continues to focus the buying public, with options and incentives not available in the second-hand market. As mortgage rates continue at their low levels and the rate of house-price increases calms down, opportunities exist for our clients.
The Queen’s Speech confirmed the Government’s commitment to the white paper, launched back in February, saying there would be a particular focus on releasing more land for homes, ensuring that new homes were delivered more quickly, supporting more housebuilders and providing further support for those with an emergency housing need.
Help to Buy scheme
Key for us in new-build right now is certainty on the future of the Help to Buy scheme, which is scheduled to end in 2021.
The Conservative manifesto was silent on the subject, in sharp contrast with the Labour manifesto that pledged to maintain it until 2027, albeit on a more targeted basis. The Government did commit to enter discussions with the industry on the scheme’s future. While those discussions had started, they need to be picked up again by the new housing minister, Alok Sharma, very soon.
As the Home Builders Federation has said: “Given the stated intent to continue to increase output, and taking into account that the scheme has helped 120,000 people to own a home in the past four years, it is difficult to imagine the Government won’t want to see it, or a modified version of it, continue post 2021.”
At the end of March, £5.9bn of government funds had been taken up by the scheme since its inception. It is now running at £0.6bn a quarter, so by summer 2018 the scheme may well have reached £8bn – closer to the £9.5bn allocated by former chancellor George Osborne.
The present chancellor, Philip Hammond, will make the call on whether further funds will be placed into the scheme, but as an industry we need to brace for the fact that, at the very least, this will come with some revision attached.
A possible way forward, minimising market disruption while also reducing government funding, is to look at the huge variance in average house prices across England’s regions.
The Office for National Statistics currently reports on nine English regions, with prices ranging from £123,000 in the North-east to £483,000 in London. By smoothing out these averages and dissolving nine regions into four – North, Midlands, South and London – and applying a more focused cap in each, the scheme would still be workable but also better targeted, instead of the nationwide cap of £600,000 that we have now.
James Chidgey is new homes relationship manager at Mortgage Advice Bureau