Hurdles preventing expansion in the UK house building market

By Richard Carr

It’s unlikely that the UK will meet is target of building 150,000 new homes in England by 2020 unless barriers to expansion such as finance are removed, new research has highlighted.

Hurdles holding builders back

Richard Carr house buildingRichard Carr works as a Development Specialist for Fortitudo Property and is in agreement with the new research published by real estate firm Savills.

Private house builders currently build the majority of the UK’s new homes, with the largest companies having the potential to expand further.

However, the operating margins of major house builders are only now just returning to their target and Savills report recommends that a better finance structure would allow medium, regional house builders to expand.

Private house builders increasing output

Since the UK’s economic downturn private house building levels have increased to meet demand, whilst 45% of the homes that they have built have been in the affordable category.

It’s believed that the government’s ‘Help to Buy’ scheme and ‘Help to Buy’ equity loan will continue to support new home buys moving forward. In the year to March 2015, 30,146 sales were supported by the schemes; whilst 32% of sales for the largest house builders were supported by Help to Buy.

“We estimate Help to Buy will support 30,000 new home sales per year and our estimate of potential delivery of homes by the private sector up to 2020 relies on its continuation. If Help to Buy comes to an end after its current funding expires in 2020, we are likely to see start volumes tapering off up to two years before the end of the scheme in anticipation,” the report says.

Access to funding

Competition amongst lenders is working in favour of SME house builders as access to funding eases and choice continues to grow. Currently, 45 different borrowing options are available to builders, which is of sharp contrast to the market following the downturn.

Lending Institutions

Richard Carr believes this is without doubt the case and that the other issue is that lending institutions have become much more aggressive in there charging of excessive exit and arrangement fees, thus putting the developer in a more vulnerable position.

The more worrying point to him is still the ludicrous difficulty of getting a mortgage for people in their late 40s onwards, and the removal of so many products.

It apparently is easier to get a mortgage in some less well known countries than the UK!