Harris Lamb Blog – 25th Feb
25th February, 2011.
The Credit Crunch Continues?
…The implications for new build homes.
By Andrew Lamb, Director.
Our own Andy Lamb talks about the reasons for the current paralysis in the housing market and the potential impact this is having on developers.
Rightmove, which is the UK’s largest residential property portal, has said that most of the UK’s property housing market faces ‘paralysis’ this year. The reasons put forward by Rightmove are that many sellers are refusing to drop their prices, they even point to the price of newly advertised properties rising by 3% in January to £230,000.
The main reasons for this ‘paralysis’ is however attributed to a lack of mortgage finance for potential new entrants to the world of house ownership plus equity erosion for existing house owners as house prices fall meaning people are unable to ‘move on’. This is before we factor in uncertainty in peoples minds over job security and public sector cuts.
Whilst there may be an argument that house purchasers are now looking for bigger discounts from asking prices, the major factor has to be, as Rightmove say, the continuing ‘credit crunch’ and the terms available for mortgage lending being so much more exacting and strict. Whether size of deposits on new houses required; the earnings multipliers being restrictive or the interest rates being charged it all adds up to a tough job in getting a mortgage.
The implications for new build residential schemes are not all gloom and doom though with many areas of the market still being extremely active.
The latest national statistics on house building for the last quarter of 2010 showed seasonaly adjusted house building starts at 23,000 which is 54% below the March 2007 quarter peak but it is 40% above the trough in the March 2009 quarter.
The statistics showed an annualised number of starts to December 2010 of 103,140 up by 32% compared with the 12 months to December 2009.
It is important not to confuse the data on house sales with house building starts, as the data shows the number of houses being built is ‘on the up’.
The strength of the private rented sector has been endorsed by the news in the last few days that Barratt Development are considering a move into London’s rental market as it looks to ‘hedge against the impact of restricted mortgage availability’. If the UK’s largest housebuilder is looking to build and manage a large portfolio of residential property then the signs are clear that the house building industry will find ways to innovate and adapt to provide the new housing stock that the market demands.
Indeed, speaking recently to a developer of city centre schemes, they have shifted to now holding and letting out residential units as opposed to selling, and are reporting full occupancy and waiting lists for available accommodation to let.
If you are looking for advice on bringing forward land for residential or mixed use then please contact one of the Development Consultancy Team at Harris Lamb.
Andy can be reached on 0121 455 9455 or via email: firstname.lastname@example.org.
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rs and authors only and do not necessarily reflect the views of any named companies or thier employees.