A determined market

With the property market fighting on, schemes like Funding for Lending, NewBuy and FirstBuy have all been introduced to lend a helping hand and boost the market.

John Elliott, Managing Director of Millwood Designer Homes, talks about the developments over the last few months, and why our determination has never been more crucial.

“A recent survey carried out by Primelocation.com has revealed that almost two thirds (63.4%) of parents have contributed financially (on average £38,903) towards their children’s first homes. £154,991 is the average cost of a first-time property, so parents are stumping up approximately a 25% deposit.

“This is great for those who can afford it, but the lack of funding and stricter lending criteria as we try to make up for the past mistakes of bankers is having a massive effect on our younger generation.

“Many children continue to live at home for longer in order to save up for a deposit, with 11% of parents allowing their children to stay at home for free. In addition, 28% of parents would be willing to sacrifice luxury or non-essential purchases, 16% would be prepared to reduce their standard of living, 20% would withdraw funds from their pension or savings and just under 13% would take on new or additional mortgage debt – all to help their children put that first step on the property ladder.

“Why such a desperate need to help? Funnily enough, despite our five-year recession, we still view the property market as a solid investment.

“An Englishman’s home is his castle and since pensions were devastated by the last government, our home is the only asset we can have without being taxed. I see no good reason why our incremental house purchases throughout our lives should not form the mainstay of our pension fund.

“To give you some idea of the strength of property as an investment, recent data from Nationwide shows that the average UK house price has increased from £1,891 to £166,022 during the Queen’s reign – almost an 88-fold-increase over the 60-year period. Having recently celebrated her Jubilee, it appears that an Englishman’s castle is as robust as our Queen!

“So if there’s one thing that history has shown us, it’s that property is a wise investment. Values might fall but historically they always bounce back. It is the strength of bricks and mortar that keeps it resilient. Even after the recessions we have experienced, property will always be a worthwhile investment, particularly long term.

“Those that are yet to venture onto the property ladder are positive. 81% of British adults hope to be home owners within 10 years' time, and 74% aspire to it within two years, according to a new research article published by the Council of Mortgage Lenders, based on the results of a survey undertaken by YouGov.

“So, it appears that both our aspirations and our determination remain high, and the British love affair with home-ownership is fighting on! House prices seem fairly level at the moment, either going slightly up or down depending on who you listen to, and I expect that this will continue for most of the year.

“However, recent reports suggested that home loans were down 2.5% in May to 50,525 with first-time buyers the hardest hit. Loans for new buyers fell to their lowest level for 10 months and lending to borrowers with small deposits dropped for the fourth consecutive month.

“Help, though, is at hand. Mortgage lending is set to receive a boost under government proposals to offer cheap loans to banks through its Funding for Lending scheme. The Government unveiled a £100bn package of support aimed at helping banks increase lending levels and protecting the UK economy from the worsening crisis in the Eurozone.

“Delivering their annual Mansion House speeches to the City on 14th June, chancellor George Osborne and Bank of England governor Sir Mervyn King revealed an ambitious scheme to boost mortgage and business lending.

“The Bank will provide unlimited loans to lenders at lower than market rates with conditions to ensure the money is lent to businesses and home buyers at cheaper rates.

“A the Funding for Lending scheme will cut banks’ funding costs in exchange for lending commitments, and George Osborne says the new scheme could support up to £80bn of new loans, offering lending to families aspiring to own their own home alongside loans for businesses looking to expand.

“This stimulus could make a major difference to gross lending this year by providing loans with money that would not otherwise have been available. It addresses the funding problem, which is the key issue with the mortgage market, so I view it with cautious optimism.

“The NewBuy mortgage indemnity scheme developed by the Home Builders Federation and Council of Mortgage Lenders and launched by the Prime Minister in March, is already proving successful. Reservations are now nearing 500, the first completions have taken place and currently five lenders are supporting the scheme.

“Since launching in April 2011, FirstBuy has been successfully enabling eligible buyers to purchase a brand-new property, funded by an affordable mortgage with assistance from a Homebuy Agency and house builders who are participating in the scheme. It has proved to be incredibly popular, receiving around 11,000 inquiries a month.

“We also need to continue to build more homes in order to address the chronic shortage ahead of us. Recent figures released by the Home Builders Federation revealed that approvals for 36,761 new homes were given in England in the first quarter of this year. Although this is a 10% increase on last year and 33% up on the previous quarter, approval levels are still way short of the 60,000 required each quarter to meet housing need.

“There are lots of variables and factors when it comes to the future of the property market and we are all well aware that there is still a lot of work to do, particularly with the Eurozone crisis. The lack of mortgage finance remains the biggest risk to the performance of the housebuilding sector and a lot of its fate rides on the decisions being made regarding the Eurozone.

“For now, we should remain positive as it has been a good start to 2012. Miracles do not happen overnight, so we must be patient. Aspirations and determination need to hold strong for just a little while longer.”

Millwood currently has a range of properties in locations throughout Kent, Surrey and Sussex. For more information about any of the developments, visit millwooddesignerhomes.co.uk.