Despite political and economic uncertainties the first half (H1) of 2022 has been a positive experience for housebuilders and for Mortgage Advice Bureau’s (MAB) New Homes division.
From January to May, MAB New Homes wrote more than 10,000 mortgages, with 70% of business written from our top-eight new-build appointed representative firms. And H1 trading was strong, with most developers reporting that their private sales rates were ahead by circa 2–3% against the same period last year.
Buyers want an attractive build with purpose-designed spaces
Looking ahead, housebuilders are likely to target volume growth, which will be no easy feat given the recent Bank of England interest rate increase and with Help to Buy soon coming to an end.
However, despite inflation being at a record high, rising fuel and energy costs, and increasing interest rates, the price of property coming to market has hit a fifth consecutive record, albeit only by 0.3% as the pace of price growth slows.
The search is on…
There are several reasons why home hunters are searching for new-build homes, and why so many are making it their aim to complete this summer.
First, now that final pandemic restrictions have been lifted, people are putting into action long-planned lifestyle changes, with more ‘well-planned family space’ at the top of the agenda. Having taken the opportunity to save over the past 24 months, buyers are using their position to step up to an attractive new-build that provides purpose-designed internal and external space.
Reservation is the first tangible commitment from a customer towards their intention to become a buyer. New requirements have been enforced
Second, the Help to Buy scheme is due to end on 31 March 2023, starting the countdown for first-time buyers who have used numerous lockdowns to save hard for a deposit. This should result in a big push from these eager would-be homeowners who need to get their applications submitted by October 2022.
Third, the cost-of-living crunch and energy price hikes have made new-build homes the obvious choice for many people, thanks to their higher building standards and warranties. Overall, new-build homes are more cost-effective to run and will dramatically lower the owner’s costs and carbon footprint in many cases.
Fourth, the increasing awareness of and interest in new homes — and the lack of availability in the second-hand market — continue to drive sales for new homes, month on month.
Now that final pandemic restrictions have been lifted, people are putting into action long-planned lifestyle changes
A significant percentage of large housebuilders are reporting healthy forward-selling figures, with many advising that they have ‘sold out’ until the end of the second quarter (Q2) of 2022, which further emphasises market demand. From a builder’s perspective, there are still challenges over the supply and demand of key materials, but these issues are improving with time.
Other ongoing challenges include access to trades and skills within the sector, but the outlook is considerably better when compared directly with Q2 2021.
Similarly, we have seen continued interest from mortgage lenders in the new-build sector, alongside an encouraging increase in higher loan-to-value mortgages. But there’s still a way to go and we expect to see more lenders move up the LTV curve over the coming months, particularly for new-build properties.
Reservation agreements
Reservation is the first tangible commitment from a customer towards their intention to become a buyer. New requirements have been enforced to ensure that customers are fully informed, creating better confidence to see the purchase through.
Despite political and economic uncertainties the first half of 2022 has been a positive experience for housebuilders
The New Homes Quality Code is largely principle based; however, the Reservation Agreement, Section 2.2, does stipulate mandatory requirements, which are important for professional advisers to understand.
Changes include:
- A mandatory 14-day cooling-off period from the date of reservation — any requirement for the customer to exchange within a set timescale must be applied from the end of the cooling-off period;
- Section 2.13 of the code requires that reservation fees are protected; and
- Provision of an affordability schedule, which reasonably identifies likely costs relevant to the tenure and management of the new home over the first 10 years.
These changes will require many developers to amend their approach to reservation. However, they are designed to improve customer outcomes and to reduce cancellations by creating a more informed buyer.
Mobeen Akram is national new homes account director at Mortgage Advice Bureau
This article featured in the July edition of MS.
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