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Barriers to expansion need to be removed to boost UK house building
Private house builders in the UK could potentially start building 150,000 new homes in England by 2020 if barriers to expansion like finance are removed, new research shows. Private house builders currently build the majority of new homes in the country and the largest have the capacity to increase output through measured and planned expansion, according to the analysis from real estate firm Savills. The operating margins of major house builders are only just returning to their target, the report says and suggests that better finance availability would allow the medium sized, often regional, house builders to expand. But smaller house builders are not expected to recover back to their former levels but will be able to expand output via niche opportunities and through custom and self build. The data from the report shows that private house building levels have been increasing over the last six years since the economic downturn. Not only are house builders increasing their output to meet demand, they built approximately 45% of all new affordable homes last year. The majority of new homes, 54%, are being built by the 11 largest house builders, that is those building over 2,000 homes a year, and levels of starts have recovered to 20% below their 2007 peak. One third of new homes are being built by medium sized house builders, those who complete 100 to 2,000 homes a year, who are back to the levels of building in 2007. The group that has struggled the most since the downturn are smaller house builders. Although some have expanded to produce more than 100 homes per year to become medium sized, others have stopped registering new homes altogether contributing to a 10% decline in registered house builders in 2014 compared to 2013. The report explains that the government’s Help to Buy Equity Loan and NewBuy schemes supported 30,146 sales of new homes in England in the year to March 2015 and among many of the largest house builders an average of 32% of sales are supported by Help to Buy. ‘We estimate Help to Buy will support 30,000 new home sales per year and our estimate of potential delivery of homes by the private sector up to 2020 relies on its continuation. If Help to Buy comes to an end after its current funding expires in 2020, we are likely to see start volumes tapering off up to two years before the end of the scheme in anticipation,’ the report says. It points out that access to funding is easing for SME house builders and competition among lenders means that the range of choice continues to grow. According to SPF Private Clients, a financial services broker, there are currently 45 different borrowing options available to SME builders. This is in sharp contrast to the very restricted market following the downturn. Big banks which previously preferred to focus on major house builders are now prepared to advance in the region of 60% of the cost of… Continue reading
Increase in lending for new homes across the board in Australia
There has been an increase in lending for new homes in Australia to both owner occupiers and investors, according to the latest housing figures from the Australian Bureau of Statistics. The data shows that there was a 4.3% increase in the number of owner occupier loans for construction, while the equivalent number of loans for the purchase of a new property rose by 1.6% in April. The figures include an increase in lending for investment in new residential dwellings which took the annual value to in excess of $9 billion for the first time ever. Harley Dale, chief economist of the Housing Industry Association, said the number of first home buyer loans for owner occupiers remains low, but is running at its highest annual level in a year, although that of course excludes those first time buyers entering the investment market. He also pointed out that the number of trade-up buyer loans reached its highest level since prior to the global financial crisis and described the data as a positive update for the new home building industry. A regional breakdown of the figures, however, shows wide disparities in new housing conditions. The total number of owner occupier loans for new housing increased in six out of eight states and territories. Over the three months to April this year the seasonally adjusted estimate of new loans increased by 4.9% in New South Wales, by 4.7% in Victoria, by 3.4% in Queensland, by 1.6% in South Australia and by 20.6% in the Northern Territory. The number of loans fell over the same period by 4.4% in Western Australia, by 10.3% in Tasmania and by 8.7% in the Australian Capital Territory. Continue reading
Fewer homes coming onto the market in UK, despite positive election result
Hopes for a post-election supply bounce in the UK residential market fail to materialise and selling instructions fell for the fourth month in a row, according to the latest monthly report. Indeed, the average stock of houses per surveyor has fallen by around 12% since the start of 2015, the data from the May report by the Royal Institution of Chartered Surveyors shows. But prices are not suffering with 38% more surveyors expecting higher house prices over three next three months and new buyer enquiries are rising at the fastest rate in over a year. The RICS report shows that house prices rose again in May, and at a quicker pace than in April, as the stock of homes per UK surveyor fell to a record low since the data series began in January 1978. While 34% more surveyors saw prices rise in May, the same month in which the Nationwide Building Society estimated that the average price of a home in the UK has now climbed to £195,000, supply to the market declined with 19% more surveyors reporting a drop in new instructions. Despite the rise in new buyer enquiries, which increased from a net balance of 4% in April to 18% in May, many respondents to the survey expressed some surprise at the lack of post-election bounce in fresh supply following the unexpectedly decisive outcome to the poll. The North West and London saw the sharpest drop in instructions compared with April. More ominously, UK wide listings have now failed to see any meaningful growth since the middle of 2013. Additionally, although respondents' reported a slight improvement in credit conditions with higher perceived loan to value ratios on mortgages to first time buyers and existing home owners, the average number of newly agreed sales per surveyor rose only very marginally to 19, down from 23 in May 2014 and up from 18.9 in April 2015. At a regional level, unbalanced price growth continues to be particularly marked across the market. Surveyors reported the highest price growth over the last three months in the North West, Northern Ireland, East Anglia and the South West. But London is now seeing a slight turnaround, following seven consecutive months in which the net balance for prices was in negative territory, it has now been positive for two months in succession. In the lettings market, tenant demand continued to increase in May on a non-seasonally adjusted basis extending an uninterrupted run of demand growth into a fifth straight month and respondents' anticipate rents will rise across all parts of the UK over the next three months, with expectations most elevated in the East Midlands and the South West. ‘There had been some hope that the removal of political uncertainty would encourage more properties onto the market but the initial indications are that this is not proving to be the case. As a result, it is hardly surprising that prices across much of the… Continue reading
