Housing Watch: New year, new build challenge

Last year was a very successful one for new build sales, including a record quarter in the spring of almost 15,000 linked to the Help to Buy (England) Equity Loan scheme.

This was supported by the Ministry of Housing’s most recent annual return of new builds – Housing supply: net additional dwellings, England, 2017 to 2018 – which saw an encouraging 6.4 per cent increase over 2016-17.

New build completions accounted for 195,290 of the 222,190 net dwellings total, of which Help to Buy completions made up 25 per cent.

So, what about the prospects for the year ahead?

While we closed 2018 on a high, sustaining year-on-year increases in private housebuilding completions will be a challenge.

Demand for new build homes will certainly continue – albeit reflected in purchasers meeting affordability pressures after six strong years of house price growth.

The announcement in the autumn Budget that the Help to Buy scheme in England will continue into 2023 was widely welcomed and gives more certainty of demand to housebuilders with sites going through planning stages, and for larger sites due for sales release later this year.

Of course, it is important to recognise that its extension from April 2021 has different rules and is essentially, therefore, a new scheme.

Out go movers and in come regional house price caps. England has nine regions used for government purposes and statistics, and the different caps at regional level mean first-timers will be restricted to a maximum of 1.5 times the current forecasted average first-time buyer purchase price in each region.

As Hamptons International head of research Aneisha Beveridge recently pointed out, the gap between the current average price of a new build and the proposed price cap for 2021 is already very close in regions that take in the Midlands and the North. Being a forecasted “average” purchase price it masks regional variations where cities, the areas most in need of additional supply, are likely to be above this price cap already.

Looking ahead to March 2021, we will see the final completions drawn down under the current scheme capped at £600,000 but, in the following month, completions will be capped from £186,100 in the lowest priced region and at various caps upwards from that point.

This will make for an interesting transition period, so it is important for housebuilders and associated professionals to understand how the intricacies of the new scheme will affect it and its usage well before then.

This key point was highlighted by John Tutte, ceo of Redrow, in the announcement of their Half-Year results recently, reported by Housebuilder News, when Tutte said that the firm would not change its strategy ahead of changes to Help to Buy which will see regional price caps come into force beyond 2021, but felt that the thresholds should be revisited before that date.

“The thresholds and boundaries are arbitrary – it’s a postcode lottery,” he said. “The threshold in Stratford upon Avon is £200,000 less than Banbury 20 minutes down the road. There is time for the government to look at that.”

Other opportunities available to advisers this year include the fact the number of current Help to Buy homeowners making their first equity loan interest payments increases to over 40,000 in England and Wales. This will provide similar opportunities for lenders too.

Fortunately, the variety and number of Help to Buy remortgage products for like-for-like and staircasing, along with high loan-to-value products for full redemption, does have more substance to it than a year ago.

Opportunities are also emerging in the shared ownership sector, as starts by housing associations begin to increase. According to latest data from the National Housing Federation, the number of new homes started by housing associations in England was up 7 per cent to over 10,000 in Q3 2018.

We await further developments following the announcement by the Ministry of Housing in October that it intends to establish a new homes ombudsman. What is clear is that it wants to see a watchdog that will champion homebuyers, protect their interests and hold developers to account.

The housebuilders trade body in England and Wales, Home Builders Federation, is working closely with the Ministry. It says its primary objective is to ensure progress towards improving the quality of new homes and customer redress is done in a way that is workable for the industry.

James Chidgey is new homes relationship manager at the Mortgage Advice Bureau

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