The term affordable is an intriguing one. There are many definitions, the two most common being within one’s financial means or inexpensive or reasonably priced. Both seem to work for me.
It is amazing when doing a search on the word ‘affordable’, how the first results have it followed by the word ‘housing’. And when doing a full search on ‘affordable housing’ a staggering 33.2 millions results are generated.
The International Monetary Fund recently revealed what most Australian home buyers already know, that their country’s housing market is among the most expensive in the world. The IMF’s Global Housing Watch went so far as to rank Australia as the third least affordable place in the world to buy a house – behind only Belgium and Canada.
Withough wanting to focus on Australia too much, there has long been growing concern over the lack of affordable housing reaching a potential crisis point.
In a recent submission to the Senate inquiry into affordable housing, Mission Australia, the Australian affordable housing organisation, called on government at all levels to beef up social housing investment, remove planning and regulatory barriers to new housing construction, undertake major urban renewal projects in areas of run-down social housing and unlock private financing with targeted government support.
There are reported to be more than 220,000 people on public housing waiting lists across Australia and a ‘gap’ of 553,000 dwellings for low-income renters nationwide.
Turning our attention to the UK, it appears that in light of concerted calls for greater levels of affordable housing and numerous government and local council initiatives, more new homes are being built.
Figures from the National House Building Council show there were 36,343 new home registrations between July and September – the highest number since 2007. The NHBC’s quarterly figure for Q3 highlights an 8 per cent rise when compared to the same period last year. New home registrations are seen as a strong indication of builders’ readiness to construct new properties and the government’s help-to-buy scheme has been cited as a major reason for this increase.
Help-to-buy has certainly been instrumental in making greater numbers of affordable new-build homes accessible to borrowers. Statistics reported in September suggested that the scheme had helped almost 30,000 households purchase a property since its launch, and that first-time buyers utilising help-to-buy were paying a quarter less for their new-build home, as the average purchase price under the scheme fell for the third month in a row.
There remain clear obstacles for borrowers in the raising of sufficient deposits, but help-to-buy is certainly helping to ease this particular burden and also encouraging more activity and confidence within the construction industry. Staying on the statistics treadmill, output in the construction industry was estimated to have grown by 0.8 per cent in the three months to the end of Q3, according to recent figures from the Office for National Statistics.
In the 12 months to the end of Q3, output was estimated to have increased by 2.9 per cent. This was said to be the sixth consecutive period of annual quarter-on-quarter growth. In September 2014, output in the construction industry was estimated to have increased by 1.8 per cent year-on-year. Housing, as a sub-element of all construction output, was worth £6.77bn in Q3, 22 per cent higher than in Q3 2013.
It is clear that housebuilders are making the most of this growing demand and backing offered by government initiatives. For example, Taylor Wimpey has just announced that it is selling more houses now than it did in 2013 – despite last year’s surge in demand for new homes.
The nationwide builder said that demand for new-builds was growing at a “healthy” and “steady” pace despite a slowdown in the wider market. And when it comes to the wider new-build sector, it is not just first-time buyers who are attracting the attention of housebuilders. Barratt Developments is reported to be changing the way it designs, locates and markets some of its homes, in an attempt to capitalise on the country’s rising population of older homeowners.
The move is said to be the latest sign that companies around the world are seeking to tap into a market that will dominate spending in the coming decades – the baby boomer generation of over-55s, a generation which, according to Euromonitor, is expected to wield global spending power of $15trillion (£9.5 trillion) by 2020.
It is no secret that population numbers are rising and people are living for longer, which inevitably puts constant pressure on housing supply chains, whether in Australia or the UK.
Fortunately, it appears that the UK construction industry is moving in the right direction, and as a result the new-build lending arena will also continue to expand. Like any of the more niche sectors there will always be an element of specialism required in the advice process, but this knowledge gap is closing. More and more intermediaries are engaging with new-build and working closer with developers, housebuilders and lenders to increase business volumes and revenue streams.
With demand for new-build properties mounting, intermediaries, whatever their speciality or background, need to be aware of the type and variety of products within this sector and be in a position to at least identify the available opportunities, whether it be in handling the cases themselves or understanding the appropriate point of referral point to a market specialist.
New-build has long been a sector which has promised much for the intermediary market, but has often flattered to deceive. However, in the UK at least, there are signs that it is starting to deliver on some of this previously unfulfilled promise.
Local government initiatives will carry on materialising, alongside more innovative, flexible products to recognise the fact that not every borrower will be able to benefit from the full term of a fixed-rate mortgage. Relationships will strengthen across the board to help close the supply gap, and we expect to see enlarged lending appetites across a variety of providers.
All of which help point to new-build as being one of a handful of sectors which will continue to rise in prominence over the course of 2015.
Jackie Uhi is managing director, mortgage distribution at Barclays
Key Points
The Australian housebuilding market is the most expensive in the world.
Help-to-buy has certainly been instrumental in making greater numbers of affordable new-build homes accessible to borrowers.
With demand for new-build properties mounting, intermediaries need to be aware of the type and variety of products within this sector.
