October 2020

In spite of the coronavirus pandemic and the subsequent economic crisis that has ensued, findings suggest that the property market is continuing to boom.

Although the global pandemic has effected many peoples’ lives, leading to job losses and a reduction in low-deposit loans, temporary measures put in place by the government have attempted to support the housing market through this turbulent period.

With such temporary measures as the stamp duty cut, introduced earlier on in July this year, buyers have been given a window of opportunity in which to buy a new property and save money on certain costs associated with this process.

Figures from a property website have recently revealed that during October, the average price of a home in Britain hit £323,530 – a record high. Compared to a year ago, prices are now £16,818 (5.5%) higher, this being the largest rate of increase in over four years.

Rightmove director of property data Tim Bannister was reported to comment the following on the matter: “Previous records are tumbling in this extraordinary market, and there are still some legs left in the upwards march of property prices.”

Rightmove have announced that their predictions for the annual rate of price growth could peak by December, predicting this to be around 7% higher than it was a year ago.

In spite of an effective market closure that occurred between the end of March and the middle of May, Rightmove claim that so far 2% more sales have been agreed in comparison to this time last year. In addition to this, Rightmove have also said that the average time in which to sell a property has also reached a record-breaking high of 50 days – being a whole 12 days faster in comparison to this time last year.

Bannister further commented: “Many buyers seem willing to pay record prices for properties that fit their changed post-lockdown needs, though agents are commenting that some owners’ price expectations are now getting too optimistic, and not all properties fit the ‘must have’ template that buyers are now seeking.”

“Not only is the time left to sell and legally complete before the 31 March stamp duty deadline being eaten away by the calendar, but more time is also needed because the sheer volume of sales is making it take longer for sales that have been agreed to complete the process.”

During last week’s Conservative party conference, Prime Minister Boris Johnson unveiled his proposal for turning “generation rent into generation buy”. Johnson’s proposals involve making long-term, fixed-rate 95% mortgages more accessible for first-time buyers.

Johnson said during the conference that his party needed to “fix our broken housing market”, helping younger generations of people who struggle to afford deposits onto the property ladder.

Johnson continued: “We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95% of the value of the home – vastly reducing the size of the deposit.”

“We believe that this policy could create two million more owner-occupiers – the biggest expansion of home ownership since the 1980s. We will help turn generation rent into generation buy.”

Lending in 2020

Since the coronavirus outbreak and the global pandemic that has arisen from this, low-deposit loans have all but disappeared, many lenders withdrawing their offerings of 90% – 95% mortgages.

PM Johnson claims that out of prospective first-time buyers, two million could afford repayments on a mortgage, however face difficulties getting approved. In light of this, Johnson believes that by making low-deposit loans more accessible to such buyers could create, as previously mentioned, “the biggest expansion of home ownership since the 1980s’”.

So far, the government has yet to go into detail as to how plans for “Generation Buy” would work. However, it’s been speculated existing regulations may need changing in order for this to be feasible – including those established after 2008’s financial crash.

Such rules restrict the amount of high LTV mortgages lenders are able to offer. When applying for a mortgage, the maximum amount borrowers will typically be able to get is four and a half times their annual income. On top of this, Bank of England regulations further limit the attainability of this maximum amount – only allowing lenders to offer 15% of their loans at this amount or higher.

These rules, as well as other measures for affordability that surround lending criteria could, theoretically, be relaxed. However, the chance that mortgage lenders would be on-board for such a change up of regulations, particularly during a time of such economic uncertainty, is unlikely.

A possible way around this would be for the loans to be guaranteed by the government, holding responsibility over any and all borrowers that default on their home loan.

While many have started to predict the feasibility of Johnson’s plans, only time, and further announcements surrounding this plan, will tell just how the government intends to introduce “Generation Buy” to the UK.

While employment continues to fall, the PMI’s latest data suggests a sharp rise in activity for UK construction for the end of the third quarter.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered 56.8 for last month (September) – this being up from August’s 54.6. The data from August signalled a setback for UK construction’s output recovery, as growth was shown to ease considerably from the high seen in July.

Throughout September the number of staff continued to fall, however the rate at which workforces were contracting slowed the most that has been seen in seven months. Of the explanations given for this significant fall in employment, some reported this to be down to the release of furloughed workers, and a restructuring of business operations.

According to data, the category that performed the strongest was housebuilding, with work done on commercial projects also having risen significantly.

As well as this increase in new work, construction firms also recorded an increase in purchasing activity as the third quarter came to an end.

This data has received some interesting responses from the industry, many reflecting on the positive results whilst thinking forward to the future of UK construction given the country, and indeed the world’s, current situation.

FMB chief executive Brian Berry said: “Growing activity in the construction industry should make this an attractive sector for young people considering their next steps after school, and people leaving other industries looking to retrain.”

“Construction has a key role to play in rebuilding the economy as recognised by the Prime Minister in his ‘build, build, build’ speech earlier this year. However, to ensure high standards, the industry needs to train, train, train.”

“This means the trades need to be prioritised in the Government’s funding allocations for colleges. It also means we need to strengthen colleges’ links with employers so that we join the dots.”

ilke Homes executive chairman Dave Sheridan commented: “It’s great to see housebuilding continue to bounce back strongly since lockdown earlier in the year, which is being buoyed by the release of huge pent-up demand in the housing market.”

“However, if the construction industry is going to continue on this positive trajectory it’s going to be crucial that we scale-up innovative methods to housebuilding because, at present, the sector does not have anywhere near the capacity to deliver on the government’s 300,000 home a year target.”

“Increasing housebuilding output must not come at the expense of the UK economy meeting its net-zero targets by 2050.

“That’s why as we look ahead to a more carbon-conscious climate, factory-built homes must sit at the heart of the solution.”