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I recall sitting at my desk in March of last year, with the COVID 19 pandemic’s impact starting to take hold and being told by surveyors and commentators that residential house prices would crash by 20%, possibly more. One mentor of mine, an industry doyen, said this will be like the property crash of 1973 again. As Managing Director of a Development Finance lender, I felt the cold winds of a housing crash, as we decided whether we should change our lending criteria, based on these warnings.

Here we are 18 months later and not a day goes by when I don’t read an article commenting on the surge in house prices. This is corroborated by our experience on the ground, where our borrowers are selling their completed developments in record time, at prices well above the levels we had originally valued the properties at. We are seeing houses selling off-plan or at the very early stages of the build. It is not unusual for there to be multiple offers from buyers, well over the asking price.

Our surveyors report the same is happening in other parts of the country. For example: double digit price rises in Nottingham, properties over £1 million in rural areas seeing 7% rises in the year to March and so on and so forth. Net mortgage borrowing was the highest in March 2021 than in any other month since comparable data began in 1993.

The reasons for this market mania have been well discussed. Low interest rates, a chronic shortage of supply of quality housing and lifestyle changes, where buyers want more space and are prepared to move out of urban areas, have led to increased demand. Then throw in a stamp duty cut, a scheme to support 95 per cent mortgages for first-time buyers and then the human element, whereby the fear of missing out leads to increased prices. It becomes a self-fulfilling prophecy, with the media, estate agents and other parties commenting on the surging house prices and the record highs, which in turn leads to buyers worrying that time is of the essence.

My fears back in March 2020 thankfully have not come true, but I am concerned that the market is now overheated, and we could see a readjustment, next year. We will see the effects of the end of the stamp duty cut, the possible ending of quantitative easing and interest rate increases. My sense is that the euphoria will stop and there will be a pull back. Hopefully, I am wrong, but I always prefer to hope for the best but prepare for the worst.

Sam Howard

Prime Minister Boris Johnson has announced that construction sites will be able to remain open over the course of England’s second national lockdown.

 

Addressing the nation on the 31st October, PM Boris Johnson stated that the construction sector could remain operating throughout the new lockdown, with restrictions in place from the 5^th of November until the 2^nd December. Johnson claimed:

 

“The virus is spreading even faster than the reasonable worst-case scenario of our scientific advisers […] so now is the time to take action because there is no alternative. Workplaces should stay open for where people can’t work from home, for example in the construction and manufacturing sectors.”

 

This clarity on the matter comes as a refreshing change to the sector, after the initial announcement of the March lockdown earlier this year caused confusion with some over whether or not sites should stay open.

 

In addition to the go-ahead from the PM for construction sites to remain open and operating during this lockdown, Johnson also added that the job retention scheme will be extended until December this year. Johnson said:

 

“I’m under no illusions about how difficult this will be for businesses which have already had to endure such hardship this year and I am truly sorry for that. That’s why we are going to extend the furlough system through November […] we will not end it, we will extend furlough until December.”

 

The new restrictions for England’s new lockdown, implemented on the 5^th November and remaining in place until the 2^nd December, require people to remain in their homes unless for certain purposes, to not mix with households other than your own, and for certain businesses and venues to close.

 

Build UK stated the following on the matter:

 

“Construction and manufacturing should stay open across all four nations, which is testament to the industry’s response to the pandemic so far. Sites are advised to review their social distancing measures and remind the workforce of the importance of complying with the Site Operating Procedures ‐ Version 6 whilst on site, as well as the new restrictions off site to protect their family and colleagues.”

“Tradespeople can also continue to work in people’s homes as long as both the worker and household members have no symptoms of coronavirus. The Work Safe Safe Work Guide can be used to reassure householders.”

 

“Hotels can remain open to provide accommodation for workers. We are currently reviewing the implications for construction workers and please let us know if you have difficulty finding accommodation for workers working away from home.”

 

Build UK have also created an authorisation letter template. This template is for employers in construction to use should their workers be stopped when traveling to and from work, anywhere across the UK.

With England’s second national coronavirus lockdown coming into effect this Thursday, the FCA have recently proposed an extension to the mortgage holidays deadline. Under such proposals, borrowers will have until the 31^st January next year (2021) to apply for the payment holiday.

 

The scheme was set to end last Saturday, however, with the FCA’s new proposal, borrowers could now be provided with a little more leeway in light of the current situation, and the new measures due to be implemented.

 

According to UK Finance, some 2.5 million borrowers have opted for a mortgage payment break since the pandemic first begun.

 

Last week, a Joseph Rowntree Foundation study found 1.6 million households were concerned about their mortgage payments for the next three months. This new extension to the mortgage holiday scheme could be a welcome relief for some, providing support for borrowers who are financially struggling due to the coronavirus pandemic.

 

The FCA’s Proposal

 

On Monday the 2^nd of November, the FCA proposed to extend the payment holiday availability, adding to their website a section on “Our proposals to extend support”, stating:

 

“We announced that we would propose more support for people affected by coronavirus. We’ve set out these proposals below. If these are confirmed, we’ll provide details on how to apply for this support.”

 

“Remember, don’t contact your lender about this extended support just yet. But if you’re struggling with your finances, get in touch with your lender to discuss your options.”

 

What Does This Extension Mean for Borrowers? 

 

This extension could come as a great relief for borrowers struggling with mortgage repayments as a result of the coronavirus pandemic. The FCA’s proposals set out earlier this week included the following measures:

 

• Those who haven’t already taken out a payment holiday will be eligible for a maximum of two payment deferrals over a total period of six months.
• Those who already have a payment holiday will be able to apply for another deferral of three months.
• Those who had a payment holiday but have now resumed their mortgage repayments can apply for another deferral of three months.

 

Borrowers who have had two three-month payment holidays already, or alternative support has been agreed with their lender, will not be able to apply for another deferral.

 

The new proposed deadline for requesting a payment holiday is now the 31^st January 2021. It has also been reported that deferrals will not be marked on credit files as missed payments.

 

While the government has claimed that using the mortgage payment holidays will not impact upon borrowers’ credit files, some have reported that they found it difficult to get other types of loans after informing lenders that they had deferred their mortgage repayments.

 

Banks currently have until the 5^th November (this Thursday) to respond to the FCA’s proposal.

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.”