‘Unprecedented times’ is a phrase that has done a lot of heavy lifting recently. Changes that typically would have played out over a generation have been squeezed into just a handful of years. Covid has fundamentally changed the way people live in their homes meaning that for some buyers who bought just before the pandemic began, their home no longer fits their needs. Against this backdrop, we’ve been thinking about how recent events will begin to shape the market next year and beyond and what this might mean for housebuilders going forward.
1. A deepening Help to Buy shaped hole
For most housebuilders, the winding down of Help to Buy hasn’t been particularly painful. Some of the biggest builders in the country have transitioned from 30-40% of their sales being backed by the scheme to 10-15% fairly painlessly, all while selling more homes so far this year. But as interest rates have risen, would-be first-time buyers with smaller deposits have been hit harder than almost anyone else, those buyers for which Help to Buy was designed. Help to Buy will probably be missed more in 2023 than it was in 2022.
2. Fewer would-be homeowners
Help to Buy also played its part in arresting the UK’s homeownership rate which bottomed out in 2016 at 62% and has since climbed back up to 65%. Given the drop off in investor numbers, this has been helpful for housebuilders and created a ready market for first-time buyer-friendly homes. On the back of Help to Buy ending and higher mortgage rates, it’s likely that the recovery in homeownership rate will plateau at least for now, as renters stay put for longer to save up larger deposits and see where mortgage rates settle longer-term.
3. The increasing importance of selling off-plan
For years, first-time buyers have been snapping up relatively large numbers of complete, or nearly complete homes. But if their numbers drop back next year as is quite plausible, and their incentive to buy new is diminished, selling before homes get finished becomes increasingly important. And given that domestic investors are unlikely to pick up the slack with interest rates higher than many yields, domestic movers who have already built up some equity and international buyers will be the ones to watch next year.
4. A new breed of international buyer
As Covid restrictions have been lifted across the globe, international buyers have returned to pre-Covid levels. The strengthening of the dollar, and the Middle Eastern currencies tied to it, offers many overseas buyers deep discounts. At the same time, nearly 150,000 people have taken up a BNO visa from Hong Kong during its first 18 months on offer, pushing a new breed of overseas buyer into heavily domestic mainstream markets outside Prime Central London. These are buyers who have mostly only known new, and for the most part, were renting in Hong Kong.
9. A deeper shade of green
As higher energy bills have landed on doormats, the importance of efficiency savings has risen up the agenda of most buyers as it becomes one of the primary considerations. As a result, it’s likely the bar will be steadily raised, pushed up by both buyer’s expectations and potentially also tougher EPC standards to come. Solar panels and heat pumps will increasingly be installed as standard as technology improves, coupled with strong buy-in from environmentally aware Millennials as well as investors who will likely require at least an EPC C rating.
10. Winds of change?
While a general election is due in 2024, there is potential for events to bring it forward. A lot can and will change before then, but polls currently suggest we are in for a new government, and with it potentially new housing policy. We got a glimpse of Labour’s plans at this year’s party conference. And in a pitch for the centre ground, most of it sounded suspiciously familiar: a new mortgage deposit scheme for first-time buyers, more stamp duty for overseas buyers and an explicit homeownership target of 70%. There is probably currently less difference in housing policy between the two main parties than there ever has been.
Arrange a call with one of our Residential Development experts
We offer Residential Development services across the entire Hamptons network. Our dedicated team of New Homes specialists boast decades of collective experience. Developers trust us to sell their schemes again and again. Whether you’re a first-time or an experienced developer, get in touch to find out how we can support your plans for 2023.
