Although the economic backdrop, interest rates and government policy may pose challenges for 2024’s housing sector, the year has already got off to an optimistic start.

Industry data has shown month-on-month increases in house purchase approvals, alongside an easing in mortgage rates and favourable asking prices.

While a drop in planning permission approvals did not shield small and medium housebuilders from any anxieties, declining homeownership rates, the rotation of housing ministers or dwindling supply, there is a clear, sustained demand for new-build homes.

An active sector

This was certainly seen across Skipton Building Society’s portfolio, as 15 per cent of completions in 2023 were for a new-build property.

The removal of Help to Buy raised concerns that interest in newly built homes would decline, but buyers are turning to shared ownership and other affordable housing schemes to achieve their aspirations.

More first-time buyers are making use of family support to get onto the housing ladder, while borrowers as a whole optimise lending parameters with longer mortgage terms.

A survey from E.Surv last year also showed there was a growing desire among first-time buyers for smaller ‘starter homes’ with two beds, signifying that, while there is an adjustment in behaviour, new homeowners are still active and present.

Assisting new-build buyers

This interest can only be supported by products that adequately serve the needs of buyers.

Last year, 56 per cent of Skipton’s new-build business went to firsttime buyers, so we pride ourselves on providing a multifaceted proposition that caters to this sector well.

Some lenders have committed to the market by signing up to the Deposit Unlock and the Mortgage Guarantee Scheme, which allows up to 95 per cent loan to value (LTV) on new builds.

Skipton will also lend up to 95 per cent LTV on new-build homes and flats, without the use of third-party initiatives, underlining our endorsement of and confidence in this sector. The inclusion of flats highlights our awareness of current buyer trends and broadens options for potential homeowners.

Skipton also lends up to 95 per cent LTV through shared ownership and offers mortgage terms of up to 40 years to boost affordability.

This is capped at 25 years on an interest-only mortgage and 35 years for the Track Record mortgage.

Both Track Record and Income Booster (aka joint borrower, sole proprietor) mortgages can be used for new-build properties, to make access to this market even more accessible.

Skipton is aware that time is of the essence when it comes to new-build completions, so the option to extend a mortgage offer to nine months is possible at the six-month mark, bringing the offer period to nine months in total.

This means the broker and buyer can avoid having to re-apply for a product while retaining the secured rate – a feature that feels even more vital in a volatile market.

Additionally, this extra time allows borrowers to either buy off-plan or while a property is being built.

To further support the fast-moving nature of new-build transactions, we aim to have all fully packaged mortgage applications underwritten within 48 hours.

A financial leg-up

The incentives available on new-build purchases can also be of help to new homeowners, some of whom have made great financial sacrifices to achieve their goal.

Some 60 per cent of purchases include benefits, such as deposit contribution, paying stamp duty or legal fees and upgraded specifications.

To embrace the various contributions to aid buyers, Skipton will allow new-build developer incentives of up to five per cent up to 90 per cent LTV, or up to two per cent above 90 per cent LTV.

After all, this only helps the new-build market to continue flourishing and is inclusive of people who may need and appreciate that extra assistance.

Don’t ignore the market

The country has a shortage of housing supply, and the new-build sector will always be needed to build new homes. This is an area brokers specialise in, which poses an opportunity for more firms to give advice within this sector.

With the government’s plans to achieve net-zero by 2025 by decarbonising all sectors of the UK economy, heating and powering homes makes up 23 per cent of the UK’s harmful emissions. Newly built houses can serve as a blueprint for improving and retrofitting existing housing stock, such as leveraging modern design methods, technology and sustainable practices.

New-build homes are more energy efficient, with 85 per cent having an A or B Energy Performance Certificate (EPC) rating.

These homes also use 55 per cent less energy on average, which aids homebuyer trends of prioritising energy efficiency.

Work is also being done to remove the barriers faced by SME housebuilders so they can deliver more homes.

In November last year, the Home Builders Federation (HBF) released its 10-point plan of practical solutions for the government to remove barriers to house building.

Additionally, with a general election looming, the opposition has pledged to reinstate mandatory housing targets, suggesting potential support for new homes at a governmental level.

Optimism appears to have returned to developers too, as a proposed merger between Barratt and Redrow was announced to ramp up the delivery of new homes.

The signs point to restored confidence, making a collaborative, conscious effort from brokers and lenders alike imperative in addressing the needs of buyers and operators in the new-build market.

Find out more about Skipton’s New Build Proposition.