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Thoughts on the housing market for 2020

With the Conservative government announcing in October 2019 that it was extending the Help to Buy equity loan scheme past the current deadline of 2021 to 2023, John Collins, a director at DHA, examines what it means for the industry.

The housebuilding industry overall will be pleased to have seen a Conservative Government return to power with a very large working majority. 

The market and financial institutions do like certainty and the consequential rise in the FTSE 100 and 250 indices will have given the development industry more confidence to build the new homes that the UK needs and provide a stimulus to the sector as we head into 2020.   

The government initially launched the Help to Buy scheme to make it easier for first-time buyers with small deposits to purchase their first property, and help existing homeowners to move house. For those not familiar with the scheme, a Help to Buy equity loan is a loan from the government which you can combine with a deposit and a mortgage to buy a new-build property.

While the extended scheme is to be restricted only to first-time buyers purchasing newly built homes, and there are new regional price caps brought in, the incentive is there for those eager to enter the market.

The loan is capped at 1.5 times the current regional average forecasted first time buyer price, up to a maximum of £600,000 in London. For all other areas the maximum house price has been reduced, but on consideration, the figures will still provide an increased opportunity for those looking to enter the market for the first time.

In the South East, the price for properties eligible for the Help to Buy equity loan scheme from April 2021 to March 2023 is set at £437,600.

Our own experience of the South East market in the past 18 months is that developers have seen demand for larger properties slow, with two- and three-bedroom units still moving reasonably well. That trend can perhaps be expected to continue with the extension of the scheme. The added certainty in the market provided by a new majority government could mean we start to see greater activity with larger new build and indeed re-sale homes.

However, the previous Conservative government confirmed back in October that it did not intend to extend the scheme beyond 2023, and we can expect an increased take up as we head towards the scheme’s closing date deadline of March 2023. 

What happens after that date is hard to predict, but we anticipate that we will be at a positive point of the economic cycle and subject to the success of the government with its negotiations with the EU and across the world with new trade deals, there are reasons to be pretty optimistic.

We will of course need to be mindful of the March 2023 deadline, but perhaps with more certainty provided over the coming months on the economy, there could well be a large-scale latent demand for larger units that will then start working its way through into the market. With a number of housebuilders still having a number of four-bedroom houses in stock for sale, and planned in schemes, we should all be able to spot the trend as and when it emerges.

With a combination of these factors, DHA is hopeful there will be a continuation and indeed rise in activity in the residential market over the next few months with the Spring bringing a brighter outlook to the economy, the market and hopefully, the weather.

John Collins MBA BA (hons) MRTPI joined DHA in 2001 having gained experience with a Chartered Surveying Practice in Central London and over 14 years in Local Government, including working as a Development Control Manager at a Unitary Council.

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