Search Acumen: Strong headwinds face housing market
Strong headwinds face the housing market according to Andy Sommerville, director at Search Acumen.
Sommerville outlined that the decline in new build prices is being partly driven by concerns over whether this property type may be made of unsuitable cladding materials.
He said: “Existing owners of new builds have struggled to sell them due to growing reticence among lenders to lend money to prospective buyers due to fears about these properties’ adherence to safety standards.”
Sommerville believes that a lack of confidence in the standard of these properties could have a ripple effect on the rest of the housing market.
As a result, owners of new builds may not be able to move into their next home if they cannot sell their existing home.
Sommerville said: “Given that a large proportion of new build owners tend to move into houses, demand could contract for larger properties, possibly triggering a slide in house prices.”
This situation highlights the need for greater investment in the digitisation of crucial property information to help strengthen confidence in the housing market, according to Sommerville.
He believes that by improving lenders access to more property information and encouraging greater data consumption among conveyancers and housebuilders, this will enable them to identify risks quicker and better advise clients.
Sommerville’s comments follow the news that construction output fell by 12.5% in 2020 which is the greatest decline since 2009, according to the Office for National Statistics.
Despite this annual fall, looking at the data on a quarterly basis, construction output grew by 4.6% in Q4, which was accountable to a 4% rise in new work, and a 5.5% uplift in repair and maintenance.
Sommerville believes that these latest figures show the construction industry is one of the most resilient sectors of the UK economy.
He added: “The uptick in private housing output over the last quarter has been partly driven by housebuilders responding to elevated levels of demand in the market.
“Strong buyer interest has been stimulated by the stamp duty holiday and a desire by some to upgrade their properties as a result of working and spending more time at home.”