Help to Buy continues to boost housebuilding
Housebuilding figures have reached the highest level since the financial crash, according to new ONS figures
Registrations of new private homes during July, August and September were up by 20 per cent on the previous year, with 28,580 new homes registered. It is the highest number of housing starts recorded since the first quarter of 2008.
According to statistics released back in October, private housing starts have been on the up since May 2013.
It is thought this increase in construction has been spurred on by the government’s Help to Buy scheme, which has seen average reservations for new homes hit around 2,500 a month.
Launched in April, the three-year programme originally covered just new-build homes.
However the mortgage guarantee aspect of the scheme, which was originally set to be rolled out in January 2014 but was brought forward by three months, applies to both new and existing homes.
As part of the scheme several banks will offer mortgages of up to a maximum 95 per cent of the property’s value for new and existing homes with house-buyers only needing a 5 per cent deposit for properties up to the value of £600,000.
The increase in demand is leading housebuilders to ramp up production, building out existing sites which have been on hold, and looking to start on new sites sooner.
Stewart Baseley, executive chairman of the Home Builders Federation, said: ‘Help to Buy is increasing demand for new homes and the industry is responding. People’s inability to buy in recent years has been the biggest constraint on the industry’s efforts to build more homes. If people can buy, builders will build. Help to Buy is allowing people who can afford to buy a home to do so, meaning builders can get on with building the homes the country needs.’
Housebuilder Persimmon plans to open 85 new sites before the end of the year as a direct result of the increased mortgage availability brought on by the Help to Buy scheme.
Jeff Fairburn, chief executive of Persimmon said: ‘The Equity Loan element of Help to Buy is already having a meaningful impact on the housing market, by addressing the issues of restricted mortgage availability and large deposits that were preventing many potential homeowners from buying a home of their own.
‘To increase volume to meet this increased demand, we are stepping up our investment in land and construction, opening 85 new sites before the end of the year and developing on all sites where we have implementable planning consents.’
Other housing developers are in agreement. Pete Redfern, chief executive of Taylor Wimpey said: ‘It enables us to build more homes on the sites we have already got open, and also gives us more confidence about investing in future sites and infrastructure which creates more jobs and economic activity locally.’
Mark Clare, chief executive of Barratt added: ‘Customer interest in the Help to Buy scheme has been very strong as it has successfully addressed the issue of lack mortgage finance at higher loan to values. Interest has been particularly encouraging from customers previously locked out of the market by high deposit requirements.
‘If we can sell homes more quickly we can build more quickly and we are rapidly increasing production. We now have the confidence to target the construction of 45,000 homes over the next three years and we are investing in land and bringing it through planning to meet increased demand. We are also expanding the business by taking on 600 new apprentices and graduates to tackle the skills shortage that could constrain future growth.’
RICS chief economist Simon Rubinsohn, also commented on the figures: ‘The improvement seen in the latest figures was driven by new developments, initiated by private sector house builders whose activity increased by more than nine percent compared with the previous three months, and by almost thirty percent compared to the same period last year.
‘The dramatic turnaround can, in part, be attributed to the first stage of the Help to Buy scheme but is also down to the Funding for Lending initiative which has contributed to the rise of competitive mortgage products on the market. Hous builders have in the recent past made much of the lack of effective demand as a reason for moving slowly on new developments.
‘Our latest quarterly construction survey, released last month, gave a strong signal that housebuilding would pick-up sharply. We expect total housing starts to climb to around 130,000 this year, compared to 100,000 in 2012. Although this is an encouraging development it will, however, still leave the number of starts below the required level and, as such, make little inroad on the overall shortfall in housing. As a result, there remains a strong case for further innovative measures to be introduced to deliver more homes, covering not just the private sector but also the affordable segment where new starts actually fell between the second and third quarters.’