In the year to end January 2018 new build house prices rose on average by 9.8% across the UK which is up on last year’s figure of 5.8%

Political events

Help to buy: Equity loan transactions now represent about one

third of new build sales. The scheme comes to an end in 2021

and some forward planning will be needed to prepare for this

change in the demand base. The recently published Lloyds

Bank House Building Report 2018, finds that over four in five

(house builder) respondents to their survey finds the scheme

to be fairly or very important to the industry.

One way in which the Land Registry is trying to speed up and

secure property transactions is through ‘Digital Streets’. The

aim is in part to speed up and reduce risk in the conveyancing

process. Of course this sort of thing is particularly important

to house builders as one title deed gets split down to

many and anything that can simplify the surrounding legal

complexities is to be welcomed.

Market forces are pushing change in terms of construction

techniques and labour availability and this is discussed below.

The market

The UK Finance Mortgage Trends survey came out in January

and reported some slightly mixed news on the mortgage

front.

It reports that mortgage lending to first time buyers, home

movers and buy to let were all slightly down in December

2017 compared to the same month last year. But that said,

2017 saw the highest number of first time buyers since 2006,

standing at 365,000. And of course the good thing about first

time buyers is that for the most part they start buyer chains.

Their research also finds that the average age of a first time

buyer is 30 with an income of £40,000, an LTV (loan-to-value

ratio) of just under 85% and loan of £138,000. The average

Home mover is 39 with an income of £54,000. Their average

LTV is just under 73% and average borrowing is £175,000.

But whilst the whole year figures show signs of healthy

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LSL New Build IndexThe market indicator for New Builds February 2018

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growth, the volume of mortgage approvals in December was

down on last year - so this might be an early indicator of a

slowing market. Whether this is a blip or a knock on effect

to the shortage of property for sale that has been previously

reported is something that will become evident through 2018.

Deloitte run a survey of economic activity at city level

by counting the number of cranes in various centres, as

more building work generally indicates more economic

prosperity. Record levels of construction activity were noted

in Birmingham City Centre with confidence

being high as a result of HS2 and the

2022 Commonwealth Games. Over 4,000

residential units were identified as being

under construction. In Leeds the second

highest volume of office construction

in a decade was noted, which is driving

employment and in turn nearly 1,600

residential units were found to be under

construction - the highest level since 2008.

Manchester has been tagged as one of

Europe’s fastest growing cities and the

report has found that 11,000 residential

units are under construction, up 60% on

last year.

The long view

The Lloyds Bank 2018 House Building

Report proves a good sounding board for

the industry and includes some interesting

findings. Average five year turnover growth

expectations from current turnover, for the

100 house builders that were interviewed

stood at 29%, with SME house builders

predicting a higher rate of growth than

last year and top ten house builders now

expecting a slower rate of growth over the

period. This may of course be due to the

Government’s targeted help towards these

smaller businesses.

The report also found that only around

one in four companies were expecting

to increase the number of houses that

they were building this year and five year

house price inflation expectations has held

steady at 11%. That is broadly consistent with other market

projections.

Against Government led calls for a growth in the output of

new housing, the report finds that the sector expects to see a

contraction in its workforce in coming years as the workforce

ages and recruitment issues continue.

Brexit uncertainty, rising material costs and access to EU

labour were cited in the report as key challenges facing the

new build industry. As with the wider economy, the Brexit

effect seems to be to reduce investment levels and confidence

in planning for the future.

Propertywire has recently reported that one of the tallest

modular property developments has just got the go ahead

in Croydon. The 21 storey modular block will be constructed

offsite and then the units are dropped into place on site.

So market forces – a demand for ever more new build property,

combined with a reducing ability to build new homes in the

traditional manner - must eventually drive output towards

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Modern Methods of Construction (MMC). The above mentioned

Lloyds Bank review finds that for the most part, over 50% of

companies with a turnover exceeding £25 million are trying out

various MMC approaches.

The above mentioned Deloitte’s crane report suggests that

there may be more opportunities around key city centres

and MMC modular construction is well suited to high rise.

There are of course various spin off issues arising from

this, not least lender acceptability and having a method

of recording the MMC build type for future generations.

Hopefully the Land Registry will be aware of the potential

to link this sort of information to the more traditionally held

legal data that accompanies a property’s title deeds. The

Land Registry is actively looking to industry to advise it on

how to make its data more relevant and this type new build

construction type ‘log book’ is one way.

Current news

The recent stock market corrections, in which some markets

have fallen by over ten percent, will be a source of confusion

or concern for many. As with the housing market, the value

of shares is determined by the trading of a relatively small

amount of them on any given day. And as with the housing

market, sentiment plays a key role. Ironically it was the

economic strength of America that seems to have caused the

market correction. A strong labour market has led to wage

growth which brings with it the likelihood of price inflation

which generally brings the desire to cool things down by

raising interest rates.

And rising interest rates in America will have a global knock on

effect and will make gilts a more attractive investment as their

return improves. So the outlook to shares relative to gilts has

changed and a share price correction occurs. But whilst few

seemed to have forecast this market correction, the resulting

likelihood of earlier and higher interest rate rises in the UK now

seems more predictable. We are still looking at relatively small

interest rate changes but they will have a knock on effect on

mortgage rates.

At the start of February it was reported that 550 of the 1,400

apprentices at Carillion had received new job offers. This was

partly due to the CITB having sourced a £1000 a head incentive

to companies taking on the affected staff.

A report from House Simple has found a larger than expected

increase in new sales listings in January so perhaps this is an

indication that more sellers will be entering the market this

year. If so then estate agents will be pleased as they have

reported a shortage of property coming to the market over a

sustained period.

This is based on a weighted calculation which reflects regional differences in sales volumes of flats and terraced property. Ave annual earnings from ONS EARN 05: Average Gross Earnings of Full Time Employees.

2 BED 70 SQ.M

STARTER HOMEAVE ANNUAL EARNINGS FULL TIME EMPLOYEES HPE AFFORDABILITY

INDEX

East Anglia £252,560 £32,646 7.74 125

East Midlands £136,023 £27,507 4.95 80

Greater London £494,250 £38,559 12.82 206

North East £114,026 £26,602 4.29 69

North West £142,974 £28,446 5.03 81

Scotland £136,253 £29,442 4.63 74

South East £253,994 £34,151 7.44 120

South West £186,754 £29,721 6.28 101

Wales £121,402 £27,285 4.45 72

West Midlands £160,812 £28,329 5.68 91

Yorkshire and the Humber £139,954 £27,681 5.06 81

Average 6.21 100

First Time Buyers - Affordability.

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Average New Home PricesPeriod February 2017 to January 2018.

SCOTLAND £ AVERAGE

£280,006

£141,856

£194,876

£193,267

NORTH EAST £ AVERAGE

£300,627

£128,110

£184,741

£167,924

NORTH WEST £ AVERAGE

£341,485

£156,649

£202,692

£210,894

YORKSHIRE & THE HUMBER £ AVERAGE

£307,698

£160,652

£190,071

£191,994

WEST MIDLANDS £ AVERAGE

£374,271

£182,396

£239,194

£232,217

EAST ANGLIA £ AVERAGE

£467,148

£278,358

£335,768

£326,232

WALES £ AVERAGE

£247,808

£163,134

£187,911

£167,273

EAST MIDLANDS £ AVERAGE

£329,165

£162,822

£199,720

£202,324

SOUTH WEST £ AVERAGE

£381,886

£218,837

£255,511

£259,461

GREATER LONDON £ AVERAGE

£865,148

£496,382

£584,407

£622,153

SOUTH EAST £ AVERAGE

£535,549

£268,996

£368,535

£354,908

NORTH % AVERAGE

4.58%

5.27%

9.19%

5.22%

SOUTH % AVERAGE

12.31%

17.55%

11.51%

14.30%

Detached

Flats

Semis

Terrace

North/South Average % Change

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This Index has been prepared by e.surv using anonymised

data based on a proportion of all new build valuations

provided for lending purposes. Figures represent 12 month

rolling averages for each period. The copyright and all other

intellectual property rights in the Index belong to e.surv.

Reproduction in whole or part is not permitted unless an

acknowledgement to e.surv as the source is included. No

modification is permitted without e.surv’s prior written

consent.

Whilst care is taken in the compilation of the Index no

representation or assurances are made as to its accuracy

or completeness. e.surv reserves the right to vary the

methodology and to edit or discontinue the Index in whole or

in part at anytime.

e.surv (www.esurv.co.uk) is the Valuation business of LSL

Property Services plc (www.lslps.co.uk) and is the UK’s largest

residential valuation practice, acting for lenders, developers,

Social Housing organisations and other stakeholders in the

residential property market.

The business employs circa 450 chartered surveyors and

covers the entire UK.

LSL Land & New Homes is a trading style for members of the

LSL Property Services Group Estate Agency Division, one of

the leading residential property services groups in the UK. It’s

strategy is to create partnerships with developers and builders

to support their objectives and add value to their businesses.

It can provide integrated solutions for their benefit drawing

on the expertise of companies who are also under the LSL

Group umbrella including valuation services (e.surv), rental

portfolio services, asset management services and estate

agency services fronted by well-known high street estate

agency brands like Your Move and Reeds Rains. Services

can be tailored to suite individual needs from bespoke site

sales and marketing, agency referral to the disposal of part

exchange, assisted schemes and new build stock, land sales

and acquisitions.

Disclaimer: The data is provided by LSL Land & New Homes and is based on data provided as described above. While reasonable skill and care has been taken in the preparation of the data – the copyright and all other intellectual property rights of which belong to e.surv limited - neither e.surv Limited nor LSL Land & New Homes can accept liability for the accuracy or completeness of the data provided.

Reproduction in whole or part is not permitted unless an acknowledgment to e.surv Limited is included. No modification is permitted without e.surv Limited’s prior written consent.

No warranty of the figures is given and no responsibility or liability of any nature to you or any third party for the whole or any part of its content is accepted. It is assumed that you will carry out your own due diligence before proceeding with any proposals or making any financial commitments.

For further information or enquiries regarding the underlying data of the

LSL New Build Index, please contact Shaun Peart via email

Shaun.Peart@lslnewhomes.co.uk or by phoning 07789 948411.

For further information about the LSL Property Services Group including

LSL Land & New Homes and e.surv, visit www.lslps.co.uk

Notes