Improved market sentiment, buoyed by Funding for Lending and the equity loan element of Help to Buy is having a positive impact on new home sales rates. Launched in April, the scheme yielded almost 7,000 reservations in its first three months alone.
Across the top eight listed housebuilders, the average sales rate per outlet per annum in 2012 stood at 28. This figure rose to 33 for those issuing trading statements for the year to June 2013. The outlook remains positive; the June Home Builders Federation survey presented the most optimistic assessment of future sales since January 2007.
Increased sales activity will mean more site openings as housebuilders accelerate delivery to meet demand. As existing landbanks are worked through at a faster rate, demand for land is likely to grow, sustaining price growth.
The Help to Buy initiative will be particularly beneficial to sites in more mortgage constrained residential markets that may not otherwise provide the sales volumes to make new schemes viable. The NewBuy mortgage guarantee scheme, for example, saw its highest take-up in the lower value markets of the North of England and the eastern fringe of London. Given the scale of the Help to Buy initiative, a similar trend may help to unlock more marginal sites.
Help to Buy is also likely to be valuable for smaller housebuilders, given that no equity contribution is required on their part. This is in contrast to FirstBuy which required equity input from the housebuilder, putting the scheme out of the reach of many cash-strapped smaller players.
We are already seeing better take up of Help to Buy from smaller builders, supporting their delivery programmes. Question remains, however, on the impact on sales rates when the programme comes to an end in 2016. The government needs to provide clarity on how the transition to a post Help to Buy era will be approached.
Improving market sentiment and faster rate of sale of new homes is yet to translate to any significant rise in the value of residential development land as tracked by our index.
In the second quarter of 2013, greenfield land values rose by 0.6%, and urban values increased by 0.5%, bringing the annual rate of growth to 4.3% and 3.1% respectively. Bidding has strengthened for sites brought to the market recently, suggesting that we are in the early stages of a more substantial increase in land value.
National and regional land price growth disguises a complex localised picture. Permissioned sites in strong housing markets continue to achieve multiple bids and the price of this type of land is rising quickly. Medium-sized sites in the 50-200 unit range are seeing aggressive bidding in the right locations.
In many high value towns around the country, a shortage of permissioned land in the right locations is pushing values close to, and in excess of, their former highs.
Delivery by housing associations is building again after adjusting to the new Affordable Housing Programme, including lower levels of grant.
The top 50 housing associations delivered fewer homes in England in the 2012/13 financial year than in 2011/12. Starts among the top 50 are up, from 17,350 in 2011/12 to 27,938 in 2012/13.
To offset reduced subsidy, more housing associations are building homes for sale and rent on the open market, to cross subside their affordable housing programmes.
As housing association development programmes become increasingly ambitious and more strategic, building and developing a supply of sites will be critical to delivery of a wider range of housing types.
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