• Industry sentiment has been positive moving into 2013, despite the backdrop of relatively subdued economic conditions and prospects for minimal house price inflation in 2013. The major housebuilders are reporting strong profit growth, while the Home Builders Federation survey reported an increase in net reservations between November and December, a first in its 21-year history. Housebuilder confidence is high.
• Mortgage lending is showing some signs of easing, boosted by a rise in lending to first time buyers, up 13% in the year to November 2012, according to CML, attributed in part to the Funding for Lending scheme.
• Our own forecasts are that average UK house prices will grow by just 0.5% in 2013 and remain low for the next five years. Housing transaction levels are also likely to remain low, rebuilding only slowly. Government interventions such as FirstBuy and NewBuy are set to boost market take up. Activity will be healthiest in higher value towns and cities, and in the upper price tiers of the housing market, albeit that, in all markets, good sites with limited competition will always attract interest.
• There is growing institutional investor demand for larger scale development opportunities in the build to let sector, with new players entering the market. The government’s Build to Rent Fund and debt guarantees will help to bring forward more sites including the larger sites where higher rates of market absorption can increase financial viability and accelerate placemaking.
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