The year started with plenty of confidence as the disastrous Mini-Budget had been mostly unravelled and the markets had begun to stabilise.

This confidence was quickly tested, though, when inflation ramped up and interest rates followed suit. Pressure on mortgage rates, consumer confidence and buyer activity has been felt across the market, particularly in the new-build sector.

When assessing the state of the housing market, I work by the rule of the three A’s: appetite, affordability and ability. These are the main boxes we must tick to encourage activity. Although there are challenges at the moment, there are positives to take and opportunities available.

Appetite

Recently I joined my new-build team in exhibiting at the London Home Show in Westminster. It was a fantastic event for first-time buyers (FTBs) in the capital and was well attended. Almost 4,000 people visited the show and our six new-build advisers were rushed off their feet all day, discussing the options.

Shared ownership has the potential to be the next big thing

As our brokers report similar interest across the country, we can be encouraged by the fact that the appetite is still there among the younger generation to buy their first home. After all, they are a big driver in new-build activity and play an integral role in moving the entire housing market along.

Affordability

Of course, affordability remains the biggest obstacle to homeownership. While mortgage rates have improved as swap rates have stabilised, deposits aren’t getting any bigger and neither are salaries. Following the end of Help to Buy, developers have realised this and started bringing a lot more to the table, with either deposit incentives or mortgage subsidies. Those with banking licences may even look to bring in their own version of an equity scheme.

Not only have some misconceptions begun to subside, but housing associations remain proactive in supporting existing vendors in staircasing

In the void left by Help to Buy there has been extra demand for shared ownership. It’s a proven scheme to help FTBs and single people get on the property ladder with a limited deposit. As the direction of travel clearly shifts towards affordable housing and low-deposit solutions, we expect that to continue.

Ability

One of the challenges for shared ownership has traditionally been availability. According to government figures, shared ownership accounts for less than 1% of all households.

However, we continue to see signs of improvement as more big-name developers evaluate the market and realise the opportunity it presents. Taylor Wimpey’s partnership with Sage Homes is a fantastic example.

For the housing market to fire on all cylinders, we need all three of those A’s working in tandem

Most recently, we’ve had the huge news that major housebuilder Vistry is moving away from private housing to focus solely on its partnerships model. Alongside 25-plus lenders and the wealth of housing associations, the news of major PLCs supporting the scheme would have been unthinkable even three years ago.

I’m sure the announcement will have opened many eyes to the proposition too. So, while the ability to purchase may be limited for now, it’s only growing. Appetite and demand are there, lenders are supporting it, units will sell.

Combining all three

For the housing market to fire on all cylinders, we need all three of those A’s working in tandem. We saw this most recently with Help to Buy, which answered appetite, supported affordability and was readily available with all major developers and lenders buying in to the scheme. In fact, homes couldn’t be built fast enough.

Those with banking licences may even look to bring in their own version of an equity scheme

As we head towards an election and the Conservatives feel the pressure from Labour, many have wondered if the scheme could make a return in the upcoming Autumn Statement. I’m sure many developers would like to see this, just as much as potential buyers. Let’s not forget the £2bn in profit the scheme generated for the Treasury.

Hypotheticals aside, shared ownership has all the potential to be the next big thing, especially as more developers, lenders and housing associations throw their weight behind the scheme. Not only have some misconceptions begun to subside, but housing associations remain proactive in supporting existing vendors in staircasing and increasing their share of the property.

We can be encouraged by the fact that the appetite is still there among the younger generation to buy their first home

A lack of equity schemes to support buyers makes a massive difference to affordability. Thinking of those FTBs in London — who would have benefited from the 40% loan as part of Help to Buy — there’s a clear need and demand for greater support.

One thing that was clear from our conversations at the event was that, if they could afford shared ownership, they would buy.

Paul Wilson is head of new build at Just Mortgages

This article featured in the October 2023 edition of MS.

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