By: Paul Wilson, head of new build at Just Mortgages

 

The year started with plenty of confidence as the disastrous mini-budget had been mostly unravelled and the markets had begun to stabilise. This confidence was quickly tested though, as inflation ramped up and interest rates followed suit. Pressure on mortgage rates, consumer confidence and buyer activity has been felt across the market, particularly in the new build sector.

When assessing the current state of the housing market, I work by the rule of the three As; appetite, affordability and ability. These are the main boxes we must tick to encourage activity. While there is certainly challenges at the moment, there are still positives to take and opportunities available.

 

Appetite

Just recently, I joined my new build team in exhibiting at the London Home Show in Westminster. It was a fantastic event open to first-time buyers in the capital and was well attended too. Almost 4,000 people visited the show and our six new build advisers were rushed off their feet throughout the day discussing the options available. It was also the case back in April with 5,000 people in attendance.

As our brokers report similar interest across the country, we can be really encouraged by the fact that the appetite is still there among the younger generation to buy their first home. After all, they are a big driver in new build activity and play an integral role in moving the entire housing market along.

 

Affordability

Of course, affordability remains the biggest obstacle right now to homeownership. While mortgage rates have certainly improved as swap rates have stabilised, deposits aren’t getting any bigger and neither are salaries. Following the end of Help to Buy, developers have realised this and started bringing a lot more to the table; whether it’s with deposit incentives or mortgage subsidies. Those with banking licences may even look to bring in their own version of an equity scheme.

In the void left by Help to Buy, we have seen increasing demand for shared ownership among clients. It’s a proven scheme to help first-time buyers, as well as single individuals get onto the property ladder with limited deposit. As the direction of travel clearly shifts towards affordable housing and low deposit solutions, we are only expecting that to continue.

 

Ability

One of the challenges for shared ownership has traditionally been availability. According to government figures, shared ownership accounts for less than one percent of all households. However, we continue to see signs of improvement as more big name developers evaluate the market and realise the opportunity it presents. Taylor Wimpey and its partnership with Sage Homes is a fantastic example.

Most recently though, we’ve seen the huge news that major housebuilder Vistry is moving away from private housing to focus solely on its partnerships model. Alongside the 25-plus lenders and wealth of housing associations, the news of major PLCs supporting the scheme would have been unthinkable even just three years ago. I’m sure the Vistry announcement will have opened many eyes to the proposition too. So while the ability to purchase may be limited for now, it’s only growing. The appetite and demand is there, lenders are supporting it, units will sell.

 

Combining all three

For the housing market to be firing on all cylinders, we need all three of those As working in tandem. We saw this most recently with Help to Buy which answered appetite, supported affordability and was readily available with all major developers and lenders buying into the scheme. In fact, homes couldn’t be built fast enough with off-plan demand never busier.

As we head towards an election and the Conservatives feeling the pressure from Labour, many have wondered whether the scheme could make a return in the upcoming budget. I’m sure many developers would like to see this happen, just as much as potential buyers. Let’s not forget the £2 billion in profit the scheme generated for the Treasury.

Hypotheticals aside, shared ownership has all the potential to be the next big thing, especially as more developers, lenders and housing associations throw their weight behind the scheme. Not only has the stigma and some of the misconceptions around the scheme begun to subside, but housing associations remain proactive in supporting existing vendors in staircasing and increasing their share of the property.

Without equity schemes to support buyers, it makes a massive difference to affordability. Thinking of those first-time buyers in London - who would have previously benefited from the 40 percent loan as part of Help to Buy – there’s a clear need and demand for greater support. One thing that became abundantly clear from our conversations at the event was that if they could afford shared ownership, they would buy.