New Build Market Update: What’s Changed in the Past 12 Months?

Qandor member Rachel Geddes is Business Principal and a Mortgage Adviser at Mortgage Advice Bureau on Lombard Street in the heart of London. In this article, she looks back at the effects of the pandemic in the construction industry.

We all know the past 12 months have been particularly turbulent and challenging, but like any industry, the new build sector has had to adapt and be agile when it comes to both the construction and sale of new homes.

During the first lockdown in March last year, the home building industry protected sites for a period of inactivity and quickly turned attention to the many opportunities presented by digital marketing – this essentially forced any builders who weren’t doing so into utilising a new technology.

It is now the norm to offer virtual viewings where possible and although we find ourselves in a third national lockdown, the housing market is still very much open for business and the pipeline full of buyers rushing to meet the cliff edge that is the stamp duty deadline on 31st March. This also coincides with the ending of the current Help to Buy Equity Loan scheme on the same date.  

From 1st April 2021 in England, there will be a new Help to Buy scheme which is only available to first-time buyers of a new build property. The previous scheme was open to anyone purchasing a new build, so it will be interesting to see how the take up of the new scheme differs. There’s a key element to ‘Help to Buy 2021-23’ –  several regional property price caps have been introduced, meaning consumers can only borrow a maximum of 20% of the house price based on the region they’re purchasing in (see a summary of the caps below). Under the previous scheme, the maximum purchase price was £600,000 when using Help to Buy, with London buyers being able to borrow 40% of the overall house price and the rest of the country having access to a 20% government loan to put towards their new home.

Due to delays caused by COVID-19, the government has also recently confirmed that for anyone using the existing Help to Buy Equity Loan scheme in England, they now have until 31st May 2021 to legally complete. This also gives homebuilders an extra two months to finish the construction of new homes for those who had already secured their property using the current Help to Buy scheme.   

In Scotland, the First Home fund was another incentive introduced in the past 12 months where the government loan can be used by first-time buyers to put towards either a new or existing home. In Wales, buyers of a new build home can apply for a 20% loan on a new build property with a maximum purchase price of £300,000 but the builder must be registered with the scheme.

Clearly, these government incentives have been extremely positive for the sale and production of new build homes, and another real stimulus was announced by the Chancellor in the Spending Review last November – the intention to launch a Help to Build scheme specifically for the custom build sector.

Although the scheme isn’t live yet and we await further details and a timeline from the UK government, this is a particularly interesting one for developers to keep an eye on as under the current section 106 agreement, housebuilders could benefit by selling serviced plots to anyone using the scheme. 

In the review, the government confirmed £2.2 billion of new loan finance to support housebuilders, which includes delivering a new Help to Build scheme for custom and self-builders, as well as funding for SME housebuilders and Modern Methods of Construction. In addition, £100 million of funding to support, among other things, the release of public sector land, including for serviced plots for self and custom builders.

A further development in the financing of new build homes, which has really gathered pace over the last six months, is green mortgages. Many more lenders are now offering financial incentives to customers if the home they purchase meets certain environmental standards – this could be in the form of a lower interest rate or cashback. With further investment promised into modern methods of construction and more sustainable building, if it’s good for the environment then it can also be good for the consumer’s pocket and the developer’s bottom line.  

Another way in which lenders have responded to the changing new-build landscape in recent times is to extend offer times for customers. With housebuilders facing longer than usual delays due to COVID-19 restrictions and implications such as Brexit for the sourcing of construction materials, these extensions allow developers to move forward on the build of new homes without having to worry the customer’s mortgage deal might fall through. This peace of mind offers greater certainty as we continue to move through uncertain times – it also means the builder doesn’t solely have to focus on cash buyers.  

Whatever 2021 throws at us, the new build sector can be proud of the developments made over the past 12 months with lots of positive change and a drive by everyone involved in the industry to invigorate the production and sale of new-build homes. If we continue at the same pace and with the same flexibility and ability to adapt to change, this will put the sector in an even stronger position.

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