High rents and low interest rates are positive for new-build but developers must build good properties at realistic prices
Having worked in the new-build market for more than 15 years, I have seen clear evidence that a significant proportion of homebuyers strive to buy a brand-new property at some stage in their life.
Some like it because of the convenience of moving straight in, while others see it as a sign of status. Indeed, many of us want to possess newer things; why drive around in a car that is 10 years old when you can drive a brand-new one? It is human nature.
On the whole, my outlook for the UK’s new-build market remains pretty confident.
Demand for housing in general is strong. It has been reported there are now 10 buyers for every property in England and Wales. Brokers must deliver mortgages, and quickly, so knowledge, commitment and availability will be key this year and beyond.
Demand for new-builds is supported by attractive mortgage products. It has been particularly buoyed by the Help to Buy scheme, which provided a massive boost in the right direction.
But although the scheme has helped many people already, the growing imbalance between property prices and wages means homeownership remains a distant – if not impossible – aspiration for a lot of young people. Saving for a 5 per cent deposit is not easy. And that does not take into account any associated costs such as solicitors’ fees or stamp duty.
As housing supply continues to decline against a backdrop of increasing demand, I envisage prices only being fuelled further. Genuinely affordable homes are imperative to helping first-time buyers, other homemovers and, subsequently, the country’s housing crisis.
Another problem facing the new-build market is the shrinking workforce among the construction industry. There are simply not enough new recruits or apprentices replacing those leaving the market.
In fact, it was recently reported that the UK’s construction industry needed to hire more than 400,000 workers every year for the next five years in order to build enough homes to meet the growing demand. Where is the next generation of builders going to come from?
The shortage of skilled workers puts things into perspective and it is no surprise the Government dropped its pledge to build one million homes by the end of this parliament and shifted the goal to the end of 2020.
High rents and low interest rates are positive for the future of new-build. But for the market to keep growing, developers must continue to build good properties in good locations. As long as these properties come with realistic price tags, sales will be achieved.
And on the subject of improvements to affordability, it is promising that the Government is calling for serious institutional investment into shared ownership.
According to the Council of Mortgage Lenders, more than 60,000 shared-ownership mortgages have been advanced since 2006, and it plans to provide more information on the sector in due course.
If more shared-ownership options came to market, one wonders what loan-to-value the buyer would require, and whether the options would actually be affordable. Shared ownership is high on the housing policy agenda and I look forward to seeing what steps the Government takes next.
Paul Wilson is head of the new-build division at Just Mortgages