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Demand jumps for large family homes

Mortgage finance is rated the single greatest threat to new development, with the majority of respondents saying that lack of home loans poses the biggest risk to the sector. While 70% of respondents say the NewBuy scheme could result in a modest rise in sales, it is some way from being a ‘silver bullet’ to enhance money flowing around the sector. The next biggest danger to growth is seen as a stagnant UK economy. Housebuilders are also acutely aware of the risks posed to UK development by the turmoil in the Eurozone

The report, in which Redrow Chairman Steve Morgan also shares his views on the sector, shows that housebuilders and developers expect an modest increase in activity in the sector this year, with 55% of builders expecting the volume of starts to rise in 2012, and more than half saying their site acquisition activity will increase

However, as indicated by the regional variance in demand for housing, the optimism is localised,  and tempered by concerns about the wider development environment:  almost half of those surveyed said the ‘localism agenda ’could slow down the planning process, while 80% said the New Homes Bonus will have ‘little effect’ on build volumes. Builders also forecast a rise of 3% in construction costs in 2012.

GrĂ¡inne Gilmore, head of Knight Frank UK residential research, comments, “There is no doubt that the industry faces challenges in the current climate. Curtailed funding, planning confusion, onerous levies and economic turbulence mean we are still navigating a difficult period. However there are signs of optimism, and the green shoots can clearly be seen in our survey. We expect development volumes to rise modestly over the coming year, especially in the delivery of larger, family homes.

“Government behaviour will be crucial in maintaining the momentum building in the sector – suggestions from respondents to the Report’s survey questions about what policymakers could do to aid development included reinstating regional building targets and offsetting CIL contributions against Section 106 responsibilities. One respondent put it even more simply, saying what was needed was “a period of consistent policies with no knee-jerk reactions”. Policymakers may have to do more to address some of the current barriers to development if they are to meet their own housing targets in the short or medium term.”

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