HANDS UP THOSE WHO THINK IT'S BEEN A BIT TOUGH OUT THERE!

We all agree it’s been a tough few months and all the challenges of developing new homes appear to have arrived at once. But there is good news; market conditions are becoming more favourable and the seasonal up-tick that we can generally expect from Spring, is just around the corner.

But what are the factors that have been depressing new home development activity?

Confidence (-) As with business generally, so much is about ‘confidence’ – the belief or perception that conditions are favourable to invest and that expansion will follow. Unfortunately, so over-played was the Chancellor’s hand in her first budget, we were all prepared to expect financial Armageddon and therefore confidence largely evaporated as company owners held back to avoid making costly errors.

Interest rates (+) So many FTBs (first-time buyers) are looking at interest rates that start just shy of 4% (3.96%) but, are making unfavourable comparisons with the rates back in 2009 – 2021. Today’s FTB is an average age of 34 years, so in 2009 when the rate dropped to an historic low of 0.5%, they would still have been at school. And until 2023 when the rate skyrocketed to 5.25%, all they had ever known was something less than 1%.

But 4% is less than half the average rate (9.1%) over the last 50 years. Between 1694 and the early ‘70s, a span of almost 300 years, the rate sat between a low of 2% and a high of 10%. However, by 1979 it hit a record high of 17%. It is largely expected that the B of E will reduce the interest rate again later this year from its current 4.5% to something nearer to 4%.

So, all things considered, todays rate is pretty good, it’s just that the group most challenged by getting onto the property ladder, may not agree!

Mortgage availability (+) The outstanding value of all residential mortgage loans increased by 0.5% on the previous quarter to £1,678.2 bn, the highest value of mortgage loans since reporting began in 2007. Gross mortgage advances were up by 4.9% from the previous quarter to £68.8 bn, the highest new advances since 2022 Q4, and 29.9% higher than the year earlier (source: FCA).

Purchasing incentives (-) Without question, the government’s ‘Help to Buy’ scheme (described as the biggest housing market intervention since the ‘Right to Buy’ scheme in the ‘80s) provided much needed support, assisting over 350,000 purchasers between its year of introduction 2013 and its conclusion in 2023. Based on the purchaser needing to put down a 5% deposit, to which the government would add up to 20% more, Help to Buy worked and if the government of today want to hit their 1.5 million new home’s goal, they must either bring it back or replace it with something similar.

Planning (+) In its endeavour to increase the UKs Housing supply, the government has reformed the Planning Policy Framework (PPF) applying a unified calculation model that is designed to prevent local authorities imposing restrictions on applications using their own model. Coupled with an emphasis on better use of existing space (Grey-belt and Brownfield) and added pressure on LAs to secure adequate land for plots through to 2030, this is all designed to get (and keep) development rolling over the next 5 years.

Contractors (+) The sector is facing significant shortages, the latest ONS figures show that there are over 35,000 job vacancies and employers report that over half of vacancies can’t be filled due to a lack of skills. So, Up to 60,000 more engineers, bricklayers, electricians and carpenters are to be trained by 2029, as the Chancellor outlines how the government will train more workers to tackle skills shortages and inspire the next generation into the construction sector.

Seasonality (+) Based on NHBC completions for 2023, Q2 represented 28.2% of the year as a whole and was the strongest performing quarter.

SUMMARY It has been a tough time, but the market and those conditions which strongly influence it are improving.

Sadly, April will see the realisation of the Chancellors increase in Employer’s National Insurance contributions (from 13.8% to 15.0%). And, if it affects some of the people you employ, the National Living Wage is increasing also to £12.21/hr (up 6.7%).

So now would be a very good time to review your After Care strategy. One of the principle reasons After Build continues to be the developer’s first choice when outsourcing their After Care, is the transparency of our pricing structure. We apply a single fixed fee per plot for 2 years cover (Builder’s Rectification Period) so you know at the outset exactly what it’s going to cost. That's cost-effective After Care.

And when compared to the cost for a developer who provides their own in house After Care, the savings are very significant.

Want to know more about After Build and our unique service? Speak to: Mark Fawcitt, Director of Sales and Marketing on: 07342 037810 or email: markf@afterbuild.com