Property industry reaction to government’s housing strategy

With housebuilding levels at an historic low, the government's housing strategy, which was released yesterday, aims to tackle the shortage of new homes, boost the economy, create jobs and give people the opportunity to get on the housing ladder.

New plans include mortgages of up to 95% of the value of new homes with government underwriting part of the risk as well as a £400m public fund to help new home developers unlock mothballed residential property schemes.

The government also plans to offer discounts for social tenants wanting to own their properties under the ‘right to buy' scheme, provide more public sector land for residential property developments and make available up to £150m to help bring empty homes back into use.

Click Here to download the housing strategy.

But what does the housing industry think of yesterday's announcements?

Richard Lambert, chief executive, National Landlords Association (NLA), commented: "It is a very positive sign that the government has put housing back at the forefront of the political debate where it belongs.Having recognised that the private-rented sector (PRS) is playing an increasingly important role in meeting housing supply, it is crucial that efforts across government encourage the increased supply of homes to meet housing need.

"Diversification is necessary if housing supply is to grow in order to provide suitable accommodation for the UK's growing population. The government's approach seeks to address this by highlighting the sector's capacity to incorporate a variety of investment models to compliment the multitude of smaller investors who have helped grow the sector. Institutional investment, which currently makes up just 1% of the sector, can form part of this.

Peter Ford of Townends Land and New Homes said: "First-time buyers are the ‘life-blood' of the property market and in a climate where mortgage lenders are demanding deposits in excess of 15%, anything that is geared towards assisting such buyers is a positive step. This also brings some much needed good news to the housebuilding industry as a whole and has the potential to create new jobs as well as new homes. Hopefully this will open the door to a number of buyers who have been unable to pull together the necessary deposit required and enable those hard-pressed first time buyers to take that next step.

"With that said, whilst this initiative is a positive result, we would also like to see some support for the re-sale market which accounts for a far greater proportion of the total housing market. There is the danger that by helping new homes developers, builders and first time buyers, this new scheme could have the unintended consequence of actually hampering those home-owners trying to sell properties in locations near to sites benefiting from this Government support. Therefore, it would be great to see some serious consideration given to developing policies which would aid the recovery of the whole housing market which is so critical to economic growth."

Yvette Ruggins, sales director at Affinity Sutton, commented: "The past few years have been exceptionally difficult for those trying to gain their first step onto the housing ladder and this nationwide scheme will ensure that lenders sit up and take notice of the need to increase lending to this really important section of the market.

"These measures will mean that those who can afford mortgage repayments will not be penalised for having a small deposit. It is a positive step towards responsible, affordability-based lending and a step away from the toxic combination of the excessively high deposits and a shortage of housing supply that has plagued the industry."

Imtiaz Farookhi, chief executive of the NHBC, said: "It is clear that the government is taking the current situation very seriously and we are committed to working with, and advising, the government in an attempt to support the industry at this crucial time. We believe that with record levels of customer satisfaction, there has never been a better time to invest in high-quality and energy efficient new homes in the UK.

"With NHBC predicting overall housing figures for 2011 to show little improvement on the previous year, it will be essential to monitor volumes of house building over the short to medium term. The Governmentshould be prepared to act quickly if the new measures fail to have the desired effect of creating a substantial increase in housing numbers in the UK."

Roger Hepher, Savills head of planning and regeneration, said: "The government's measures are welcome. However, there is a notable lack of comment on one of the biggest issues - the reluctance of Ministers to grant permission for housing development in the places people want to live. On three occasions in the last few weeks [Winchester, Sandbach, St Austell], the Secretary of State has stepped back from granting planning permission for substantial private sector schemes out of deference to local objectors. Reconciling economic growth with localism was never going to be an easy call, but, if growth really is the government's top priority [and if averting the nationwide housing crisis is a close second], we need to see some robustness in Ministerial decision-making."

Dave Bexon of PropertyPriceAdvice.co.uk said: "We shouldn't sniff at anything that helps to build more homes and enable people to buy them, but 16,000 homes represents probably four or five per cent of what we need to be building to meet the undersupply. Also there are many more measures required to stimulate the house building market such as ensuring adequate mortgage lending to sustain a recovery. Perhaps a stipulation of the sale of Northern Rock to Virgin at a thumping great loss for all us taxpayers should have come with a proviso that they should hit some lending targets!"

Anthony Aitken, head of planning at Colliers International, commented: The most high profile aspect of the ‘Housing Strategy' is the mortgage guarantee scheme to encourage lenders to provide 95% for buyers of new homes. This will be welcomed by the housebuilding industry, as it is imperative that people seeking to get into the housing market can get access to mortgages that will hopefully push back the statistic of the average first time buyer now being aged 37. If people can get on the first ‘rung' of the housing ladder then it will help other properties move further up the ladder, this can only be a good thing in the current economic market."

Nicholas Leeming , business development director at Zoopla, said: "The housing market has been teetering on the edge of a precipice for the last few months and it was vital the government made some decisive moves to pull it back from the abyss. Focussing on helping first-time buyers and tackling the issue of housing supply is exactly the right place to start as it is these two parts of the market which provide the foundations upon which the rest of the sector can grow. Unfortunately, it's questionable whether these measures go far enough. The schemes outlined in the plan are elective, so lenders and house builders are not obligated to participate if they don't want to. With the market in danger of stagnating, the government should have been brave enough to make their plans compulsory. It's very possible that lenders and house builders will cherry-pick the elements that suit them best rather than the people the strategy is aimed at helping."

Grenville Turner, chief executive of Countrywide, commented: "We welcome the fact that the Coalition has finally recognised the importance that the housing market plays in the regeneration of the UK economy and in particular job creation and has taken measures to support this.

"The measures announced are a step in the right direction and address the key fundamental issues that have restricted the housing market in recent years- housing supply and the requirements of high level of deposits- have both been addressed. We wholly support the focus around raising the availability of new stock in both the sales and rental markets and the measures announced to assist first time buyers onto the property ladder."

Jon Neale of Jones Lang LaSalle said: "Luckily, the government appears to be attempting to address the undersupply of new homes in its housing strategy. The £400m ‘Get Britain Building' pot will enable up to 16,000 new homes to be built on stalled sites that are currently suffering from a shortage of development finance. This will be welcome news, particularly given the apparent focus on smaller, local developers who have suffered most over the past few years but remain significant suppliers of new housing.

"Once again, though, while the initiative is to be applauded, it will not in itself restore activity to pre-crisis levels. Over the past few years, there have been on average fewer than 100,000 starts on new homes, compared to an average of almost 175,000 during the five years leading up to 2007. Britain faces a huge shortfall, with new households likely to form at the rate of around 232,000 per annum. An extra 16,000 new homes will be welcome, particularly to those employed on the sites or living in the eventual homes, but it is, sadly a ‘drop in the ocean'."

Ian Fletcher, director of policy at the British Property Federation, said: "The housing strategy is a welcome first step towards a coherent and long-term vision for housebuilding in this country and it is good to see the government recognise the importance of encouraging investment in to the private rented sector, something that will be vital if we are going to see the necessary number of homes built to meet demand.

"We would urge the government to press on with this quickly. The strategy is welcome but it comes not a moment too soon with house building at historical lows and the general economy in dire need of support. In practice this means bringing forward sites for build-to-let by next April, at the latest, and conducting a swift independent review by somebody with intimate knowledge of the sector.
"Likewise, we would urge government to get its ideas on converting empty offices in to new homes by next spring."

Jennet Siebrits, head of residential research, CBRE, said: "A focus on housebuilding is essential; the UK is suffering an absolute shortage of places for people to live - for both owners and renters. There has been a complete failure to build enough homes, so much so that the number of new homes built last year was at the lowest level since records began. Even pre-recession house-building was woefully below target and there is a cumulative shortfall over the last five years of more than half a million homes.

"We estimate around 1.4 million potential first-time buyers have been unable to enter the market over the last decade. Large deposit requirements are suffocating demand for open market sale homes and the new build indemnity scheme will loosen this noose, providing added support for the new build market. Under the proposals we estimate that first-time buyers will still need to save a deposit of around £8,000 up to £17,500 in London, but this is much more affordable than the current average deposit requirements of more than £85,000."

Nick Vaughan, head of residential development and investment at Hamptons Internationa, commented: "The government's proposals to finance first-time buyer, new build mortgages will provide a welcome boost to Britain's housing market. Regeneration projects in particular should benefit and if the Government makes a serious commitment to this initiative, there will be far-reaching benefits, particularly the creation of new jobs and communities.

"In the spirit of today's announcements, the housebuilding sector now has a responsibility to keep their end of the bargain by producing quality products with practical incentives to ensure the first time buyer is not sold short."

Steve Roche, group communications director, Persimmon plc, said: "We wholeheartedly support the government announcement regarding plans to kick-start the housing industry. The Prime Minister's proposals regarding taxpayers' underwriting mortgages totalling hundreds of millions of pounds is a radical idea and one which we believe will help first time buyers across the country make the move into their own accommodation and even support existing home owners who so far, have been unable to trade-up."

Colin Willetts of Dunelm Homes said: "Dunelm Homes welcomes the proposals set out in the housing strategy as a positive step forward, bringing together all elements of the housing chain - local authorities, lenders and housebuilders - to form a collective approach to solving the issues in the property market. Housebuilder-led ideas such as shared equity schemes have worked well in encouraging first time buyers back into the new build market but they are not for everyone. Today's announcement highlights how the government is offering solutions at every level of the market to form a more coherent, wider-market strategy to boost housing construction and accessibility for first time buyers."

Chris Cobbold of global property services firm DTZ commented: "The challenge we face as a nation is to communicate the need for new homes, and the consequence for subsequent generations of not building enough. This is an issue of inter-generational equity. The rising generation needs to find its voice in the debate - it is our children who will find it difficult to afford satisfactory housing, and it will be these young people who will end up paying a much higher proportion of their income on housing than the older generation ever did."

"The announcement by the government of a mortgage guarantee scheme is most welcome. It will boost the ability of younger households to get on the housing ladder. But in a market where overall mortgage lending volumes are only half of their pre- 2008 long- term average, the overall impact of this scheme on the housing market will be modest. The government needs to be more radical and create the environment in which major financial institutions will invest in new build private rented housing. This remains a work in progress."

Conor Murphy, managing director of mortgage brokers Capricorn Financial, said: "I think there are some good ideas here as they will help some people on to the ladder and will be a boost for the market overall and anything that can do this is a positive. Other points:
As far as mortgage indemnity is concerned, it would be better if it was an open product that could be used on any homes in the country rather than just on new build. It could be seen as almost more of a benefit to housing developers, rather than to first time buyers or the housing market in general. But it will be a good boost to new homes sector which was particularly badly hit in credit crunch and where lending is still very constrained."

Julian Bryson of unmodernised.com said: "The government's ‘Laying the Foundations‘ housing strategy for England, as a range of measures and incentives is a reasonable stab at fixing it.
"There are six main holes that the government is trying to plug here: first time buyers, non-deposits, housebuilders, non-building, non-fairness in social housing, non-utilised empty homes, non-investment in the private rental sector and non-choice in housing for the elderly.

"Unfortunately, as has been the case since 2008, it comes back down to one thing: you have to fix the banks. And that is a box that may not be ticked for some time to come."

David Cowans, chief executive of Places for People, commented: "This is a step in the right direction, but the fact remains we are not building enough homes, and we have failed to do so for many years. There is a chronic under supply of housing and we need to have a concerted push to boost housebuilding and stimulate economic growth, over the next 10-20 years.

"A long-term view is essential so developers can take bold and confident steps to address the housing shortage, and will help bring confidence to those investing in housing. As we know getting construction and development moving is about more than the provision of homes, housing plays a central role in the UK economy, accounting for 3% of UK GDP, and employing over 1.25million people. Any strategy should accelerate delivery of much needed housing, jobs and new businesses, over the next 10-20 years."

Stewart Baseley, executive chairman of the HBF, said: "This is a great deal for people wanting to buy a new home, whether a first-time buyer or existing homeowners who is unable to trade up. In recent years many people have been unable to realise their dreams of buying a home because of the huge deposits required by lenders. This scheme will allow people to buy their new home on realistic terms and help in particular hard pressed first time buyers.

"It will also be a huge boost to house building. Since 2007, the biggest constraint on homes being built has been mortgage availability. This scheme will see more desperately needed homes being built, create jobs and give the economy the boost it needs."

Ian Baker, Linden Homes group managing director, commented: "This is a significant step forward in making responsible, affordable lending available to home buyers across the country to help them purchase the home they've always wanted.

"The lack of affordable mortgage lending has been one of the main constraints to the housebuilding industry for a number of years. At Linden Homes, we have been working hard with a number of lenders to bring financial enablers to the market. However, the vital element of the government's announcement will be that these mortgages are made available right across the country from major high street lenders. Critically, they must be made available not only for new houses but apartments too so that as many people as possible have the opportunity to purchase their home."

Jo Eccles, director of Sourcing Property, commented: "There is still a fundamental problem with the market in that house prices are simply too high versus real wages. The affordability isn't there and the government's schemes, whilst they will make the housing ladder more accessible, do not address the problem of inflated prices in the rest of the market.
"It would be much more sensible for us to see a correction of prices which will hurt in the short term but bring the market to sustainable and affordable levels in the long term."

"It is good news that the government has offered funding and support to encourage new home building, as there is a severe shortage of housing which needs to be addressed."

Nick Jopling, executive property director of Grainger plc, said: "We have a national housing crisis on our hands, with twice as many people wanting a place of their own than there are available. The Housing Strategy should help ease the housing crisis we are in.
"We must build more good quality homes for people of all income levels. We must build the in the right places, and they must be houses that people want to live in."

Mark Alexander of Property118 said: "With people living longer and with less people per household, it is pretty obvious that more housing is needed. But that's just the tip of the iceberg.

"There needs to be a fine balance of release of land, incentives to develop and ability to purchase. The result of getting the balance wrong will result in either a massive property price boom or a crash in property values and huge increases in rents and homelessness."

Nigel Terrington, chief executive, Paragon Mortgages, said: "We welcome any measures that will help stimulate both the housing and mortgage markets. It is clear that the UK has a serious housing problem, with not enough homes being built and a lack of mortgage finance. Current housing completions simply aren't sufficient to meet forecast household formations, so a commitment to build thousands of new homes is a positive start, whilst plans to support homebuyers through the mortgage indemnity scheme will stimulate the first time buyer market. It is crucial to the success of the mortgage market and the economy that we have a housing market in balance and with growth options across both the rental and owner-occupied sectors."Click Here to download the housing strategy.