Leaner new homes market in strong position to withstand continued turbulence in 2013
· New home prices expected to rise by 1 - 2% in 2013
· Supply of new homes set to increase at last, as new planning policy beds in
· Supply and demand imbalance will continue to underpin prices
· Lack of mortgage finance is a continued threat, but NewBuy will help promote new build to homebuyers
Steven Lees, Director at SmartNewHomes, comments:
“The new homes market is much leaner than it was and is well positioned to continue weathering the wider economic storm, which is likely to continue through 2013. Demand for new homes is still strong and prices have fared well in 2012, with growth of around 3% expected at the end of this year.
“In spite of the launch of the NPPF and its ‘presumption in favour of sustainable development’ the industry is yet to see a significant increase in the number of new homes coming to market, exacerbating the already severe supply-demand imbalance. We are hopeful that as the changes to planning policy bed in, with the NPPF becoming applicable to those councils who already had local plans in place last year, and a Government-backed industry taskforce intended to help cut red tape gets to work, the number will increase in 2013. This is essential if we are to ever bridge the growing shortfall. However, the Localism Bill remains the new-look planning system’s ‘Achilles heel’ with the potential to undermine the drive for more new homes if local communities reject development without careful consideration.
“Moves to dramatically increase the number of new homes to meet buyer demand, however, will be rendered useless if mortgage approvals do not keep pace. An upturn in the number of high loan to value mortgage products for first time buyers this year, including housebuilder and Government backed shared equity schemes, has helped in making home ownership a reality for many thousands of people previously shut out by the banks.
“Although a long standing commitment to FirstBuy and NewBuy will see both schemes run long into 2013 and 2014, and homeowners are expected to start to feel the benefits of the Funding for Lending scheme, any move by the Bank of England to rein in inflation and help promote growth could see interest rates rise. Even if this amounts to just a nominal 0.25% next year it could make it even harder for first time buyers and existing homeowners to secure loans, reducing demand. For this reason we expect annual growth to slow next year to between 1-2%.”