To build or not to build – that is the question
“There is a general expectation that more permissions will come through, but this doesn’t necessarily mean a flood of new homes on the market,” he says. “ Outside of London and the M25 corridor, the new homes market remains ‘stuck’ with buyers wary of over-extending themselves and lacking the confidence to sell and trade up.
“Land values and planning infrastructure costs being as they are, smaller developers need a strong market and a significant profit incentive to tempt them to commit scarce capital to new development schemes. The clearing banks remain reluctant to lend more than 50% LTV for speculative commercial or residential development schemes which means that the majority of developers are limited to turning over their existing cash before they can build new sites. The Governments new ‘Get Britain Building’ scheme is a response to these concerns but the pot of money is limited and, as you would expect the scheme is beset by delays and ‘red tape’.
“Everything is in place to deliver a boost to housing supply but without an upturn in market confidence over the crucial spring period we may see little or no improvement in housing completion numbers this year. Having said that, within the London suburbs and easily commutable areas closer to London, demand for new homes continues to exceed supply and as a result we do expect to see an upturn in house prices over the year in response to continued low interest rates, increased mortgage availability and rising rent levels for family housing.
“Overall, my prediction is that we will see an uplift of 3% to 5% over the coming year, which hopefully will be mirrored by a corresponding rise in housing completions. Unfortunately in many areas outside London and the South East, local planning authorities do not appear to have got the message – if you want to deliver more quality homes for local people to live in then you are going to have to make those houses more affordable – which means a better deal for house buyers and house builders.”
Roger Hayward, Senior Partner