Undoubtedly the housing sector has faced challenging times in the past 18 months — with housebuilding itself no exception.
High interest rates and inflationary pressures affected buyer demand, stretching affordability even further and meaning the numbers no longer worked for many.
This had a knock-on effect on developers’ appetite and their ability to push ahead with plans.
Recent data from the National House Building Council (NHBC) demonstrates this. New-home registrations by developers dropped by 44% in 2023, compared to 2022. Total new-home completions, meanwhile, were down 12% , with a 20% drop in the private sector.
The wider benefits would be huge
However, we are starting to see some promising signs for what could be a positive 2024. A fall in mortgage rates has already helped bring back some positivity to the market and some much-needed confidence among consumers.
We’ve certainly noticed this on the ground at Just Mortgages. Within the new-build division we have had the most positive start for a couple of years. Not only are new-build leads and enquiries 40% higher than this time last year but, in the first full week of 2024, enquiries were 60% higher than for the average week. This has been a trend that has continued throughout the first quarter.
A key component behind this has been a proactiveness among developers, increasing efforts to create opportunities to achieve reservations.
If I was the government, I’d hitch my wagon to something that would be a real vote winner
The biggest driver, though, continues to be shared ownership, which sparked into action immediately in January and grows in momentum with every passing week. With the loss of Help to Buy — particularly hurting those in and around London — and with affordability remaining a clear barrier, potential buyers are gravitating towards this scheme.
The same NHBC report found that more than 45,000 new homes were completed in the rental and affordable sector in 2023 — up 10% on 2022 and the highest figure ever recorded by the NHBC.
Increased presence
Most importantly, major developers, lenders and housing associations are seeing the challenges facing residential buyers and are responding by increasing their presence in the space.
New lenders are entering shared ownership, such as TML, and there are improvements to rates and criteria, particularly for minimum-share requirements. And more properties are cropping up across the country.
We must do everything we can to continue nurturing the recent positivity
The launch of the Shared Ownership Council will only help to improve standards and support the work of our advisers in increasing education among both first-time buyers and individuals returning to the housing market.
These are all tremendous steps in helping to realise the potential of the scheme and to unlock what can be best described as latent demand for homeownership. However, there is still one important factor missing.
Broader strategy
The government has recently announced a raft of new policy measures as part of its long-term plan for housing. Given that housing will be a key battleground in the upcoming election, announcements such as these are hardly surprising.
However, critical supply-side measures should be just one part of a broader strategy, which also includes a concerted effort to expand the routes to homeownership that are creating opportunities in a tougher climate.
A scheme that makes the entry point to homeownership much easier feels like a no-brainer
If the government joined with the sector and really got behind shared ownership — as it did with Help to Buy — the scheme’s potential could truly be realised. Given the important role first-time buyers play in keeping the housing market moving, which in turn helps drive the economy, the wider benefits would be huge.
If I was the government, staring down the barrel of what is set to be a difficult election, I’d hitch my wagon to something that would be a real vote winner. Throwing support behind a scheme that makes the entry point to homeownership much easier feels like a no-brainer.
Within our new-build division we have had the most positive start for a couple of years
This could even mean breaking the emergency glass and returning with a version of Help to Buy. While shared ownership is doing well at filling this void, lenders and developers wouldn’t say no to the return of such a proven scheme.
With all the trials and tribulations of the past 18 months, we must do everything we can to continue nurturing the recent positivity, and give potential buyers the tools, knowledge and confidence to return to the market.
While nothing is a given, especially with sticky inflation and shifting sentiment on the path of interest rates, the outlook for the year does look positive.
Paul Wilson is head of new build at Just Mortgages
This article featured in the March 2024 edition of MS.
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