House building boom continues amid fears Help to Buy scheme will overheat the market
A wealth of residential market trends data shows that house building is booming, with developers eager to bring forward projects to take advantage of Help to Buy equity loans, writes Merlin Fulcher
New official statistics released today (25 October) are expected to confirm that UK economic growth is more buoyant than at any time since 2010.
However, fears remain that the government’s Help to Buy equity loans scheme could be fuelling a house price bubble.
Six months after the controversial 95 per cent loan-to-value mortgage subsidy was launched, house prices are rocketing – some London house prices went up £50,000 last month alone – yet a wealth of new data indicates that privately-funded new house building is surging forward.
Registrations of new UK homes shot up 19 per cent to 33,573 between July and September this year, compared with the same quarter in 2012, when 28,151 were registered.
Private housing saw a 23 per cent jump in registrations – typically made four weeks before a project starts on site – while social housing also increased by 10 per cent, according to National House Building Council (NHBC) figures.
NHBC commercial director Richard Tamayo claims the figures show a sustained broad-based recovery in the UK new housing market. He says: ‘There is little doubt that government schemes, such as Help to Buy, have significantly contributed to the growth seen throughout the course of this year.’
The latest RIBA Future Trends Survey, published this week, revealed that architects’ optimism about future workloads also increased in September as expectations for future private housing work ballooned.
Jestico + Whiles director Heinz Richardson sees a strong recovery in the housing sector. ‘Many of our current projects have significant advanced sales, creating developer confidence, which is bringing forward projects previously on hold.’
Yet Richardson warns: ‘Unsustainable growth, through Help to Buy or any other scheme, could lead to materials and skills shortages and overheating, which would lead to significant increases in cost.’
The home building boom is confirmed by new data from industry tracker Glenigan showing a 7 per cent increase in private residential planning approvals in the three months to August, compared with the same period last year.
Glenigan economist Tom Crane says: ‘The level of planning approvals is increasing as developers gear up for a strong period of growth. The figures don’t suggest growth would stop if Help to Buy were abandoned, although it may slow.
‘Market conditions are already improving and Help to Buy will remain in effect until December 2016. This will allow developers to bring forward new housing projects now, with greater certainty that demand will be strong when these projects begin to reach completion.’
Government planning statistics for England also report a 45 per cent increase in the number of planning major residential applications (more than 10 units) decided in the three months to June this year (1,600) compared with the same period 12 months before (1,100). In the same period, minor residential decisions increased by 8 per cent to 11,400.
But, according to Robert Adam of ADAM Architecture, long lead-in times after a lean period of building mean a significant shortage of new housing will remain for two years or more ‘even with some pretty frantic house building’. He says: ‘Help to Buy will increase demand and it is elementary economics that a shortage will push up values. Really, the scheme encourages builders to start this process, as does the consequent increase in sales value.’
Adam suggests Help to Buy could do more to boost employment figures in the construction industry than stimulate house sales this side of the election. He says: ‘Any benefit in a rising economy of the improved terms for sales will probably be cancelled out by increased prices. This country has had a housing shortage for decades and it is all brought about by lack of supply, [which] has been nationalised by the planning system.’
3DReid’s Graham Hickson-Smith adds: ‘Help to Buy is undoubtedly driving new developments [but], if it is canned, then something else will need to replace it. Government, regardless of who leads it, will need to innovate with the industry to keep this perennial problem from running any further away from their control and this needs to be based upon increasing supply and controlling price inflation.’
Despite concerns housing could overheat, there is speculation construction could soon recover across all sectors. Earlier this week the Construction Products Association (CPA) upgraded its 2013 UK construction industry forecast from a decline of -1.5 to -0.5 per cent.
The association also predicts 2.7 per cent growth in construction in 2014, followed by a 4.6 per cent uplift in 2015 and a 5.1 per cent growth in 2016.
Projects given impetus by Help to Buy include JM Architects’ £5.6 million Islington Wharf Mews in Manchester (Phase 2, pictured). The 46-home scheme for developer Isis Waterside Regeneration started on site in April with support from the government’s Get Britain Building initiative and has seen a surge of interest following Help to Buy’s launch. ISIS development manager Gary Watt says: ‘Help to Buy has given us a lot more confidence. It’s making us think about the next phase of development sooner that we would have.’ ISIS also submitted plans for 40 homes by NORD in Maryhill Locks, Glasgow, this week.