The UK is officially out of recession and from a distance the housing market looks rosy too with increased visitor levels and sales, low interest rates and the return of consumer confidence. So are things looking up? Not according one of the largest private housebuilders in the South East, Weston Homes. This is artificial demand being created by the shortage of homes being built and the lack of mortgage availability stopping people getting on, or even moving up, the property ladder. Bob Weston, Chairman and Chief Executive of Weston Homes, commented: “Despite the general optimism in the market and economy, property prices will remain flat in 2010, and until we see lending back to early 2007 levels property prices will not rise again. The current increase in sales and visitor levels is being created by the acute shortage of new homes being built, which is causing huge pent up demand”.
Recent figures published this month from the National Housing Federation show that the economic downturn has led to a 30 per cent decline in house building in the past two years, with only 122,000 new homes built in the year up to April 2010 - fewer than at any time since 1923. The actual figure should be nearer a million.
Since the middle of 2007 mortgage lending has declined during the first 11 months of 2009 when just £45bn was lent compared, according to the Council of Mortgage Lenders, with £157.8bn in 2006. While official figures published this week from the Council showed that gross mortgage lending declined to an estimated £9.1 billion in January, a 32% fall from £13.4 billion in December and a 21% fall from £11.5 billion in January 2009. Although a decline is typically experienced between December and January, this is the lowest monthly total since February 2000 and the lowest January total since 2000. In spite of the average cost of mortgage interest payments falling to a 13 year low at the end of 2009, deposits required by borrowers have risen by eight per cent over the past two years to 28 per cent. Bob continues: “Something needs to be done, and soon, the shortfall in housing is growing. We are finding that two out of every five buyers at Weston Homes simply cannot get a mortgage. These are first-time buyers and people wanting to move up the property ladder. More
“They have a 10 per cent deposit and need to borrow three or four times their salary. Buyers today typically need a 20 to 25 per cent deposit for a new build home. Our active buyers are those less reliant on mortgage finance or are they are seeking help from family and friends. They simply have no other way of buying.”
“A sustained and meaningful recovery in the market is unlikely. This is not due to prices, interest rates, the economy or looming election, but due to mortgage availability and an active first-time buyer market – both crucial to the housing market.”