Here we set out the 10 key trends for developers to watch in late 2022, which despite the stamp duty holiday ending, is still shaping up to be a stronger than average year.
1. The stock squeeze
With little sign of the stock squeeze coming to an
end, housebuilders are benefitting from higher demand from buyers who were not
previously considering a new home. Sellers struggling to find their onward
purchase are considering all options, with many looking to buy new.
2. The final months of Help to Buy
The remainder of 2022 is likely to see one large
last hurrah from first-time buyers before the Help to Buy scheme comes to an
end. For most developers, the price caps have already reduced the proportion of
sales made using the scheme and it’s highly unlikely this figure will recover
to pre-price cap levels. However, with the scheme coming to an end in Q1 2023,
its final year is likely to see a record proportion of first-time buyers making
use of it.
3. Filling the Help to Buy shaped hole
After the best part of a decade, the winding up of
the Help to Buy scheme towards the end of the year is likely to leave a gap in
the market for some housebuilders. Maintaining sales rates in a post Help to
Buy world is likely to require a shift in purchaser profile. This will involve
prioritising more off-plan sales to owner-occupiers in particular, which will
likely involve increasing the number of houses sold off-plan which currently
stands at 25%. Do not despair however, there is a potential solution on the
horizon in the form of Deposit Unlock Scheme. See our previous news article on
the new Deposit Unlock scheme for more information on how this works and how
you can benefit.
4. Prioritising bulk deals
Bulk deal numbers are also likely to grow, taking
the shape of pre-completion sales to both established build to rent operators
alongside newer higher profile lender and retail entrants. Typically, they are
building portfolios without offering the bells and whistles that build to rent
operators do. This means they are more willing to purchase ‘off the shelf’
stock that had been designed and destined for the owner-occupier market.
5. A limited role for the off-plan investor
For the most part, bulk sales to larger operators
will continue to replace off-plan sales to individual investors. In the years
running up to 2007 and 2016, they made up most sales in some developments. The
3% stamp duty surcharge tapered demand and it seems unlikely to recover.
Off-plan sales to individual investors are only likely to account for just 10%
of all house builder sales next year.
6. Return of the overseas buyer
However, sales to overseas investors and
owner-occupier numbers are likely to gradually recover next year after falling
to record lows in 2021. While their return is unlikely to be as rapid as the
market bounce back after lockdown, the reopening of European and American travel
will likely provide a shot in the arm for prime new-build markets, particularly
in London. But it is likely purchaser numbers from Asia will remain more
suppressed given more limited access to international travel.
7. Cash will come again
The other market which has been slower to bounce
back from lockdown has been the cash buyer. Typically these are older
purchasers who are in many cases downsizing from a family home but have been
nervous to move even as the pandemic has waned. We believe there to be significant
pent-up demand from older owner-occupied cash buyers, many of who will turn to
a new home as a hassle-free way of downsizing.
8. Continued house type optimisation
These shifting purchaser profiles and changing
buyer priorities will see heightened optimisation of standard house types.
Developers will increasingly need to incorporate flexible space for home
working, particularly in more suburban and rural schemes where buyers will no
longer head into the office every day. This brings opportunities too, with
buyers who are not tied to the daily commuting distance of their office now
searching over a wider area. It is these areas that we are forecasting see the
strongest price growth next year.
9. Rising costs drive off-site construction
Rising material costs will accelerate off-site
construction by increasing the number of factory-made elements as housebuilders
seek to achieve savings. Builders relying more heavily on off-site construction
have been more sheltered from rising costs and labour shortages. However,
strong house price growth has helped shelter developers building from scratch
on-site from rising costs to a degree.
10. Increased personalisation
And with growing elements of the home built
off-site, the opportunity for purchasers to personalise will grow alongside the
desire from buyers to do so. Longer-term, greater personalisation is likely to
broaden the appeal of new homes to a wider audience and generate greater
confidence when buying off-plan. It will also potentially offer developers the
opportunity to achieve higher margins on the back of higher specification
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an article published on www.hamptons.co.uk