Developers predict market stability in 2009

Fifty per cent of developers are predicting that house prices will stabilise by the end of the year, according to a national survey of 4,500 UK homebuilders, conducted by SmartNewHomes.com in April this year.

The majority of respondents believed that the downturn would not last beyond 2010, with some predicting a return to price growth as early as this year.

In spite of a positive outlook on prices, developers remain concerned over the continued level of depressed sales. New home starts have been severely damaged by the credit crunch, and figures are set to remain low in 2009 – a quarter of respondents predicted a further fifty per cent fall in the number of new developments to be commenced in 2009, adding to growing concerns of an imminent supply shortfall. The new homes industry is calling for more support from Government and the financial industry to help boost production.

Developers optimistic on price recovery

The majority of respondents believed the worst of the UK house price downturn is now behind us, with half predicting market stability for both new homes and re-sale property by the end of 2009, and 30 per cent predicting a further fall of just 5 per cent for the year as a whole.

Concern grows over future supply

The predicted halt in price decline by much of the industry is likely to be linked to the imminent lack of supply. New home starts have been severely damaged by the credit crunch, and there is little sign of any uptake on these depressed figures in 2009. Forty-five per cent of all developers questioned expected a further fall in the number of new developments started in 2009, with a quarter predicting a 50 per cent decline on 2008 figures.

Semi-detached and terraced homes were recorded as being in the shortest supply, despite developers reporting that these property types are in the highest demand from homebuyers.

Developers take the initiative as Government assistance falls flat

Over seventy per cent of developers questioned rated Government efforts to boost the industry as entirely ineffective, relying on their own initiatives to get people moving. The majority of respondents highlighted the continued lack of available mortgage finance as a major barrier for buyers, and rated their own direct finance-based initiatives, such as shared equity schemes, as the most effective incentive for getting people moving.

David Bexon, Managing Director of SmartNewHomes.com, comments:

“The optimistic market outlook from developers is an encouraging sign that we may now have passed the worst of the downturn. Prices are certainly no longer in freefall, with increased activity from homebuyers since the start of the year and early indicators of improvement in the mortgage market, prompting signs of stability.

“Homebuyers are returning to the new homes market, taking advantage of hugely competitive prices and a vast range of incentives to purchase the best of the remaining stock. Key areas of demand, such as affordable family homes are disappearing quickly as buyers seize one of the best ever opportunities to trade up.

“Prices have come down enough to bring out the speculative buyers in force in the first quarter of 2009, but developer incentives have proved a key means for actually pushing through sales in the new homes market.

“It has been left largely to developers themselves to find ways of getting round the restricted availability of mortgage finance. Developers’ own shared equity initiatives have proved to be a major facilitator for first time buyers, significantly reducing the deposit required to obtain a competitive mortgage rate.

Imminent Shortfall

“We are facing an imminent shortfall in supply, brought on by the severe lack of new home starts and the Government’s abject failure to boost production of the very homes desperately needed to meet its own targets.

“The industry is in serious need of greater Government support if it is come anywhere close to meeting the nation’s housing needs. It has been hit extremely hard by the credit crunch, with redundancies, loss of revenue and decreased land values. As things stand developers will be ill-equipped to meet pent-up demand once the market begins its recovery.

“The Government is standing by its housing targets, but it failed to offer any sort of genuine stimulus in the Budget to go any way towards achieving this. Major financial support is needed, both to kick-start stalled projects and to allow developers to commence the new schemes, which will be required to prevent a long-lasting housing shortfall.”