Ready for lift off
House builders must be ready to react if government initiatives deliver a boost to the sector, says property expert Rebecca Kibby
With the number of newly built homes falling and mortgage lending reduced it would be an understatement to say that the housing industry has experienced its fair share of doom and gloom since 2007. However, the start of a new year is the time to be optimistic and the introduction of several government schemes over the next 24 months could give the market the kickstart it needs. When this happens the industry will need to be prepared to reap the benefits.
Alongside the government’s Get Britain building scheme (a £400 million pot of funds to restart the construction of homes where planning permission has already been granted) there are ambitious plans under the housing strategy to make it easier for buyers to secure mortgages on new homes. The introduction of the new build indemnity scheme will enable buyers to secure loans on newly built homes with an agreed 5 per cent deposit and a guarantee that the government and house builders will provide security for the loan. Under the scheme, if a property is sold for less than the outstanding debt to the lender, the lender can recover their losses. This should encourage lenders to offer mortgages on new build arrangements. There is some scepticism as to whether this initiative will boost the number of newly built homes, given that buyers still need to find mortgage products that will provide a 95 per cent loan-to-value mortgage based on their annual income.
In the comprehensive spending review a commitment has been given to reduce the total regulatory burden on homebuilders over the spending review period. This measure will provide house builders with greater certainty regarding the regulatory requirements for the future, reduced costs and encourage further investment in new build homes. If there is less initial cost outlay to house builders upfront, this could give them more flexibility and reignite their appetite for development.
If the various initiatives have the positive impact that the government intends, we may well see a boost to the housing industry from 2012 onwards. Other predictions assert that demand will continue to increase within the private rented sector as more people move towards renting a home in the absence of readily available mortgage finance. This too may mean good news for house builders, who may look to capitalise on providing smaller developments, within certain regions where rental income and demand are higher and where cash rich investors are keen.
It’s unlikely that many in the industry will want to just wait for the market to pick up. Instead they will want to make sure their businesses are sufficiently prepared to react when things do improve. For example, those in the industry will want to think about the different ways the pressure of increased sales can be handled. This could include looking at tools such as extranets to efficiently manage the sale of plots or to create new financial products that, in addition to the government’s offering, will help the industry bounce back.
If the government initiatives have the desired impact, the next two years could really rejuvenate an industry that has experienced its problems in recent times. Those within the industry that look to explore every avenue, and whom are prepared to innovate, will undoubtedly be at an advantage.
For more information please contact Rebecca Kibby at TLT Solicitors on 0117 917 7602