It has been another turbulent year for the housing industry. However, as we approach the end of 2009, it is looking increasingly likely that we are set to finish on an improbable high.
A decidedly bleak start to the year set a precedent for the next six months, with severely depressed new home starts and decreasing prices overshadowing the market. However, since the summer we have witnessed a significant turnaround in consumer sentiment, which has permeated throughout the entire housing industry.
With burgeoning reports of stabilising house prices, homebuyers began to seek a route back into the market in July and August. In the new homes sector, developers across the country reported strong sales figures in what is traditionally one of the slowest periods of the year for housing transactions, as buyers looked to capitalise on low property prices. Visitors to our dedicated offers page on smartnewhomes.com increased significantly during this time as buyers searched for the best prices and incentives still available. Fears of a return to strong upward house price growth, coupled with the early signs of renewed competitiveness in the mortgage market, had proved the catalyst for reigniting homebuyer activity.
The absence of the traditional summer slowdown played a major role in altering the outlook for the remainder of the year. While transactions have certainly not skyrocketed (lending conditions have not improved that dramatically), the increased activity has provided a platform for UK homebuilders to look to the future with some confidence and start planning for new housing schemes next year.
The plight of developers may not strike many outside the industry as the greatest cause for concern, but the severe damage caused to the construction industry by the credit crunch would have far-reaching consequences for us all if left unsolved. The number of new home starts (homes being built) this year is certain to fall far below the targets set by the government – targets based on a desperate need to accommodate the swelling population. A shortfall in the supply of new homes against demand not only creates a potential housing crisis for the many unable to secure the homes they need, but it will inevitably push up house prices. The current shortfall caused by the lack of housebuilding over the past two years is so severe that another unsustainable price boom is a real possibility, with the potential to price would-be buyers out of the market once again. Therefore, it is in the interests of everyone that Britain starts building again.
Thankfully the Government appears to have finally woken up to the importance of housing delivery for long-term stability in this country. The latest round of funding in its ‘Kickstart’ initiative saw almost £400m invested into new developments that have stalled due to the economic climate. This represents its first significant investment in the housebuilding industry since the start of the recession and is extremely good news for homebuyers, as well as the sector, as long as new development remains at the top of the Government’s housing agenda and more proposed funds are released.
Developers are also doing all they can to boost the country’s new homes supply, with most of the nation’s top firms now looking to capitalise on improving sentiment – taking the first opportunity in a long while to raise the cash required to start new projects. There is a long way to go, but the outlook for supply is looking a great deal better than it did at the start of the year.
There still remain some risks to house price recovery, namely the inability of lenders to play ball in spite of monolithic Government intervention, but these are currently outweighed by the major supply/demand imbalance – so much so that even if we see a significant rise in stock next year, it is unlikely to have a negative effect on prices. Mortgage conditions still need to improve, but the determination of homebuyers and the growing need for competitiveness as a result, is finally working to pressurise lenders into improving the affordability of their products.
See Also: New Homes Market (28), Press Releases (372), Property News (6699), Big Smart Blog (11)
Date Published: 01 December 2009
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