Featured Sector: Private Housing

Private housing returned to the spotlight in this year’s March Budget as the Chancellor announced yet another scheme aimed at making it easier for people to buy a house with only a small deposit. The Help to Buy scheme only went live at the start of April, but initial evidence from house builders and our own starts data suggest the scheme is having the desired effect of boosting sales of houses and driving activity in the sector.

The new scheme is essentially a continuation and broadening of the previously existing FirstBuy scheme aimed at getting first time buyers on the housing ladder by providing 20% of the value of a new home in the form of an interest free equity loan, Help to Buy extends this scheme to everyone looking to buy a newly built home, not just first time buyers, making purchases possible with a deposit of only 5% of the property price.

Last year we recorded strong gains in the value of underlying private housing starts, up by over 30% compared to the level of starts seen in 2011. London and the south east as well as being the two largest regions of the UK for house building also saw some of the fastest growth during 2011 and 2012.

The sector has also benefitted from the Bank of England’s Funding for Lending scheme; aimed at reducing wholesale funding costs for the country’s banks with the hope that this will be passed on to individuals and businesses in the form of lower interest rates. While the scheme may not have boosted lending levels significantly it is believed that declines in interest rates on mortgages and business loans in the past six months are a result of the scheme.

In addition to the measures outlined above, which are all aimed at boosting demand for housing, supply side measures have also been enacted. The National Planning Policy Framework was introduced with the aim of relaxing restrictions on planning permission and promote residential construction. Research from Glenigan and the Home Builders Federation indicate that since the launch of the policy last March, planning approvals for new homes have increased compared to 2011 levels.