A peek at the stock market will confirm that shares in Barratts and Taylor Wimpey are enjoying long-term highs – reflecting increased investor confidence in the sector.
Builders have also adjusted the mix of units they produce to reflect the current demand for ‘real’ homes as opposed to the buy-to-let led boom in apartments between 2005 and 2007.
Perhaps unsurprisingly, the South East region is now showing the fastest growth in new build prices, standing at over 4%, with the East Anglia and the West Midlands around 3.5%.
The North West continues to see a slight falling away of prices but even this is an improvement on the previous month, which was showing a year-on-year drop of 1%.
Builders like to refer to the ‘new build premium’ – effectively what extra people will pay for a shiny new home versus one that’s showing signs of wear and tear. The LSL index confirms that this is a real phenomenon, with an average difference of 3.2%. versus equivalent second hand stock.
Its remarkable that in part, the recovery is down to a scheme which does not yet exist – Help to Buy. If and when the scheme gets of the blocks, prospective home owners could benefit from a 20% equity loan free of charge for 5 years.
You can’t actually access the scheme until January 2014 but undoubtedly the proposal is giving builders confidence to build and homebuyers who may think they are currently excluded from the market are finding in many cases that this is not actually the case – they just need to work a little harder to get started.
Mervyn King is already sounding doubts about long term reliance on the scheme so it may prove to be short lived. Whilst some commentators are speculating that may see an early rush with the potential to distort the market in Q1 2014.
I actually think there is another possibility – that Q4 2013 may be slower than expected as people delay until the scheme launches. For now, let’s welcome the greater activity and associated growth in new home starts, against a more mixed wider economic climate.
Richard Sexton is director of business development at e.surv