Though challenges remain, a golden period for new-build is coming
Craig McKinlay is new business director at Kensington Mortgages
Despite the rainy weather over the past month, the housing market is booming more than ever. Summer is on the horizon, bringing with it more lockdown restrictions easing. Spring also brought new changes, with the end of traditional Help to Buy and the beginning of the new Equity Loan scheme, as well as the government’s Mortgage Guarantee Scheme. The future of new-build looks bright.
The UK economy is already showing signs of a recovery, thanks to restrictions gradually lifting, generous consumer spending and the furlough scheme’s continuation, among other factors. While the housing market has been resilient throughout the pandemic, there is reason to believe that the year ahead will be even stronger, especially within the new-build sector. Along with an improving economy, social factors and adapted practices make the new build market look very promising.
For many, the pandemic has ushered in an era of at-home working and a newfound appreciation for home offices, spare rooms and access to the outdoors. There have been reports of a mass exodus from cities to towns and rural areas, as the countryside and spacious home comforts outweigh the bustle of city life. Remote and hybrid working will also be here to stay. These factors tip the scales in favour of new-builds – purpose-built and ready-made without the renovation work.
To add to these benefits, the Shared Ownership scheme also gives individuals the chance to co-own who may otherwise not be able to buy.
New services and innovation has helped to streamline the purchasing process for customers, lenders and brokers. While physical tours continue, the increase in virtual and video tours not only decreased the need for unnecessary travel, but made the viewing process more inclusive. The introduction of pre-qualifying checks on some developers’ sites also makes the buying process more straightforward. Confirming a buyer’s mortgage eligibility before taking any further steps streamlines the process for buyers, builders, and lenders.
That’s not to say there haven’t been challenges. Whenever there is a transition period, fallout is likely. We’ve seen this with the end of the traditional Help to Buy scheme and the introduction of the new Help to Buy Equity Loan. Most lenders adopting the new government-backed mortgage guarantee are not planning to use it on new-build homes, forcing first-time buyers towards second-hand homes and undermining the potential success of the new-build market going forwards.
The new mortgage indemnity scheme also poses other complications. Price premiums mean that only a few high street lenders are signed up and those not using it can be more competitive, disincentivising broad adoption. Of those involved, almost none are offering it on new builds, locking out many first-time buyers who depend on this form of property to step onto the first rung of the ladder. Due to the drawbacks of this policy and most specialist lenders also being unable to participate, a significant chunk of underserved first-time buyers who may have suffered disproportionately over the last year – such as SME owners and freelancers – face another obstacle in the path to homeownership.
Despite the difficulties, confidence and innovation are the industry’s buzzwords. Specialist lenders are always looking to streamline the mortgage process and explore new avenues to level the playing field for those disadvantaged or overlooked by high street lenders.
Ultimately, borrowers and brokers’ trust and confidence in specialist lenders remains central. The new-build market is booming as part of a broader economic recovery in the wake of the pandemic and as part of a realignment of housing trends nationally. The signs are clear that this is an attractive time to be a customer and that we are entering a golden period for new-build.