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Housing Watch: When demand outweighs supply

Experts agree the market is strong for new builds, but a lack of skills in the building sector and planning delays are setting the industry back.

Each year in late summer, Housebuilder magazine conducts its annual survey of the housebuilding industry, where a panel of experts from across the private housing divide give their views on the strengths, weaknesses, opportunities and threats facing the sector.

This year, they were pretty clear on the industry’s top strengths: the underlying demand, closely followed by the Help to Buy/government initiatives.

These were neatly summed up by Barratt Developments chief executive David Thomas: “The fundamentals for housebuilders remain positive. The market is currently strong for high-quality new homes right across the country. There is good mortgage availability, low interest rates and strong government support for housing.”

We know only too well demand continues to exceed the supply of new homes, but what is now clearer is that private housebuilding alone cannot meet the country’s challenge.

The top weakness will be no surprise to those following the building sector’s stresses and strains over recent years – lack of skills – which ranked well above the second issue, planning delays.

This weakness was recently flagged in the Letwin Review’s draft report into build-out rates, which noted that, if the government is to meet its annual 300,000 housing target, this will require an increase of about 15,000 in the total number of bricklayers, or almost one quarter of the existing size of this particular workforce.

Government influence
The top opportunity was less well defined by the panel, with the government attitude to housebuilding just edging out scarcity of supply. SME builders rated greater opportunity to increase market share and profile as their main prospect.

Since 2010, the government has given increased profile to building more housing, with the prime minister making housing her number one domestic priority (despite the number of housing ministers coming and going over that time).

In terms of the biggest threat, however, the panel saw this coming from an economic recession, closely followed in second place by labour and management shortages.

The government is reviewing the England and London Help to Buy schemes with a view to extend them past their current expiration date of March 2021, and housebuilders are keen to know what will happen, so they can effectively plan their build programmes.

For housebuilders, the closing date is effectively only two years away, as new sales will be required to be under way in the summer of 2020 in order to meet the scheme’s completion deadline, which is currently in the spring of 2021.

Help at hand?
In terms of planning the labour and materials required to deliver the much-needed additional housing, the sector needs a commitment from the government sooner rather than later.

But continuing with Help to Buy in order to assist more purchasers is just one element. The second lies with mortgage lenders, who can help in ensuring the success of the overall scheme by providing a choice of remortgage options for scheme borrowers.

Products for those wishing to undertake a like-for-like remortgage, to staircase, or to make a full redemption of the equity loan, are now gaining traction from some of those offering Help to Buy purchase products.

Last year, there were only around half a dozen or so lenders offering a capital raising remortgage to 90 per cent loan to value; however, now there are approximately three times that number, with some brands lending up to 95 per cent LTV.

Staircasing options do still appear to be somewhat limited but this is where specialist new build advisers are so crucial because, while the opportunities and choices for borrowers may appear complex, professional advice is the obvious solution.

James Chidgey is new homes relationship manager, Mortgage Advice Bureau

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