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Brand new dawn for FIRST TIME BUYERS?

Initiatives to kick start the starter home market are working – slowly. But much more help is needed,


Just as we learn that in the United States the box office hit of the moment is House Price Collapse II, over here we’re seeing housebuilders posting healthy increases in sales. Sure, the rise stems from a low base. However,

from my perspective at least, there’s a feeling that while it’s still tough out there, life isn’t looking nearly as bad as it could be. But it’s interesting that while developers are finding the going less heavy than expected, the wider market is, at best, stagnant – or on a slow slide.

There was a lot of criticism from the UK’s economic Eeyores when a number of majors announced they were stepping up their schemes to “help” aspiring first-time buyers with low deposits, shared ownership and all manner of other ideas. Their view was that greedy developers couldn’t

give a stuff about FTBs and were just worming their way around desperately trying to shift homes they couldn’t otherwise sell. They followed this with assurances that the second price collapse is definitely on the way, citing that whatever happens in America, will follow here a few months or a year later. But there’s a key element the doom mongers chose to ignore – that while unemployment continues to plague the States, over here, it’s holding up better than anyone could have expected. And what they couldn’t dispute was that more

UK first-time buyers are indeed buying more new builds. What we need to keep reminding ourselves is

that there are plenty more aspiring FTBs with decent jobs who would have no difficulty meeting their monthly mortgage payments – as long as they could get hold of a mortgage in the first place. The Council of Mortgage Lenders says the number of first-time buyers on the market is less than half of the average seen over the 36 years they have been keeping count. But according to mortgage broker, Private Finance, the monthly payments aren’t the

16| July 2011 showhouse

In the meantime, that gives the new homes industry a golden opportunity to capitalise further on grabbing a bigger slice of the market. Just how big a share is open to question given the unknown effect of what Localism will bring. But I suspect that if it does become as troublesome as many believe, these problems are likely to manifest themselves most on smaller schemes in affluent areas rather than larger, strategic sites which have political backing. That too, might be in housebuilders’ favour, at

least from the point of the wider industry, as opposed to the niche developers operating in prime spots of London and the South East, who have been riding out the recession in a fairly relaxed style. In my last column in May, I made a plea for

the government, via the Homes & Communities Agency, to seize the opportunity housebuilders are offering to boost economic activity by releasing more strategic brownfield sites. After all, what is needed to maintain the recovery is productivity and the jobs that go with it. And that’s just what the industry is capable of delivering as long as it has the raw materials available at the right price. So it was a pleasant surprise to hear the HCA

last month announce that it exceeded its homes completions target for 2010-11. That’s superb news given the state of the economy. Does that mean we should be taking our foot

off the throttle? No, far from it when you consider that total

problem. Getting a healthy deposit is the killer. “Deposits are the real issue for buyers who

have to save for months and even years to get a foot on the ladder. Even if they can get a ten per cent deposit and pass the strict credit scoring, they may find that the higher rates charged on these deals make the mortgage ‘unaffordable’,” said Melanie Bien of Private Finance. Across the wider market, there’s an entrenched battle of sellers refusing to lower prices and buyers refusing – or simply being unable – to pay them. That’s simply not a situation that can carry on indefinitely. Eventually, one side is going to have to give. But whoever does blink first, with interest rates set to stay low (despite all the nonsense bandied around about their imminent increase) this stand-off could carry on for a while yet.

UK home completions are running at barely half the government’s target rate. This is even more worrying when remembering that completions last year were seven per cent down on the previous year. I do think, however, that the success of the

HCA target gives us a lot to shout about. To the HCA we should be saying: “You see? That wasn’t all that difficult, was it? So how about releasing even more land next year and making sure we can have it for a price that allows us to operate?” As for the economic doomsayers, well, they’ve been proved thoroughly wrong so far and if we can provide FTBs with a means of their getting a foot on the ladder and they’re willing to take it, then it’s not for anyone else to criticise them, or us. Sure, the wider market’s in a stand-off at the moment with worried, if stubborn sellers. But it seems the younger generation is made of sterner stuff. Maybe they’ve heeded Warren Buffett’s advice to be greedy when others are fearful. Let’s help them.


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