"This is very good news for advisers and their first-time buyer clients and should hopefully go a long way to bridging the gap Help to Buy might otherwise leave."
That’s particularly the case when it comes to many different types of potential owners – landlords, second steppers, and the like – but it is certainly so for first-time buyers, many of whom want a property to their immediate liking to move into.
This is completely unscientific on my part, but I suspect that for every first-timer that wants a doer-upper there will be a handful who would prefer to buy a new-build, and when we add in the ready-made, highly energy-efficient nature of these properties, then you can understand why more and more new-builds are sought after.
Which leads us to something of a conundrum in our marketplace, not least the level of new-build development that has taken place, not just recently, but over a long period of time, and how we ensure the demand for new-build is met by supply.
First up, let’s look at those numbers. According to the Government’s most recent figures for the last quarter of 2021, the number of dwellings completed during this three-month period was 41,330; that was a 4% decrease on the previous quarter, and a 11% decrease for the year previously.
The numbers for dwellings where building work has started during the same period are also less than inspiring, being 41,600 – a 3% decrease on Q3 2021, and down by the same amount on Q4 2020. Indeed, since March 2021 both the number of starts and the number of completions have been on a downward trajectory.
Looking at the yearly picture, the figures are 175,390 (new dwellings completed) and 174,880 (new dwellings started) – now both of these are a fairly significant increase on 2020 but you have to remember the housing market was effectively shut down for a minimum of two months during that year, so you would anticipate figures being up on them.
What will also be of concern to first-time buyers is that one of their primary routes into a new-build has been the Help to Buy scheme and, as I’m sure you’ll know, that is due to finish at the end of March next year.
Help to Buy has often been in the headlines over the years, and has clearly been tweaked a number of times as a result. A number of commentators suggest it has been, at least partly, responsible for the rises in house prices we have seen in recent years and that those who have benefited most are existing homeowners not those purchasing.
However, there is also no denying Help to Buy has helped a considerable number of people into a new home, many for the first time, and has been a catalyst for developers building new properties as they could be certain they had immediate buyers for them.
With the changes to the latest (and last) iteration of Help to Buy making sure it is only available to first-timers and the introduction of regional price caps, it has become a much fairer system and I’m sure there will be many owners who feel they wouldn’t have been able to purchase a home without it.
And yet, as mentioned, unless there is a significant u-turn, the scheme will end. But the need will not. Therefore, we need an industry solution to take on this mantle, and to help first-timers secure the new-build properties they so clearly demand.
It’s for this reason that we have been heavily involved in setting up and launching the housebuilders’ Deposit Unlock scheme. Originally devised by reinsurance broker, Gallagher Re, and then developed in partnership with housebuilders, lenders and ourselves, this insurance-backed solution is already proving an effective replacement for Help to Buy in the new build arena, at zero cost to the taxpayer.
Specifically, for those who only have a 5% deposit, the scheme allows participating lenders to offer 95% mortgages as the house builder pays for an insurance guarantee to cover off the risk, and we work with lenders to offer the mortgage.
We’ve just recently completed the first Deposit Unlock mortgages with Nationwide Building Society, who follow in the footsteps of Newcastle Building Society, the first lender to complete loans under the scheme.
Freddie Scarratt, director at Gallagher Re, which now manages the scheme, agrees that Deposit Unlock is helping to make the new-build dream a reality for many who would otherwise have found it unobtainable: “This cross-industry, housebuilder-owned solution to fill the gap created by the imminent closure of Help To Buy showcases how, with the help of Qualis Credit Risk, the insurance, housebuilding and lending markets can come together to create a long-term, sustainable, private sector solution to help people own their own home.
“More than that, by giving housebuilders the comfort of knowing high LTV mortgages will be available to a much wider cross-section of buyers when their properties are complete, it should support and facilitate their own investment in, and pace of, additional new build developments.”
More Deposit Unlock completions will undoubtedly follow, particularly as we come closer to the end of Help to Buy, and the industry shifts towards its own solution rather than the one offered by the Government.
This is very good news for advisers and their first-time buyer clients and should hopefully go a long way to bridging the gap Help to Buy might otherwise leave. What can be in no doubt is that first-timers continue to be drawn to new-build as a go-to option.
We therefore need to ensure developers continue to develop properties in the numbers required, and we have mortgage solutions available to those with smaller deposits. Even before April 2023 the onus will be on the industry to deliver and it’s vitally important we meet that challenge head on.
