New Homes & Developments THE RACE TO ZERO

‘Net zero carbon’ is the aim of the government’s Future Homes Standard, and of the 65% of local authorities to have declared a climate emergency and, increasingly, of the buying public. How might this affect new homes?

The energy performance of new homes en masse – dominated by the big house builders – has changed little since zero carbon targets were scrapped in 2015 to encourage more building. That looks set to change as numerous pressures push for far higher energy standards. One change promised in the Future Homes Standard, is the banning of new home oil and gas fired heating systems from 2025. This will force builders to focus on passive systems (house designs which minimise the need for heating and cooling) on all-electric heating, and on renewables such as heat pumps and solar panels. Addressing the common issue of overheating, the new standard will also require better ventilation, including heat recovery, which sounds healthier, as well as less wasteful.

MORE ULTRA-MODERN HOMES

Low carbon needs will accelerate a trend for contemporary-style houses for which large sections – wall panels, bathrooms and even whole storeys – are built off site. Safer and faster to construct, the combined forces of fashion and low carbon might see such methods end the centuries-old dominance of bricks & mortar house building in the UK.

MORE RE-USE

At the same time, we should see a growth in new ‘old’ homes. Minimising embedded carbon favours the re-use of existing buildings. They will need to be suited to low carbon day-to-day operation, but some, such as the coastal fort shown below, sheltered by the ground on one side and its thick, insulating walls on the other, have a head start there.

More Small Builders And Greater Variety

The NHBC reports that the number of UK firms building fewer than 100 units a year has fallen by 85% in a generation and now accounts for just 12% of all homes built. Yet smaller businesses are often best placed to tackle oneoff conversions, renovations and brownfield sites. Of late, smaller builders have also led the field in lower energy design and higher quality. Incentives for them to invest must be part of the answer to low carbon demands – and the demand for beautiful new homes.

Help To Buy Ends March 2021

The scheme which provides buyers of new homes with a state-backed 20% loan (40% in London) and which was launched in 2013,

Below: Some regeneration schemes, such as this south coast fort, have inherent low carbon structures. (Winchester).

Above: The chart shows great differences in relative housebuilding volumes across the country.

Below: Kent, from £975,000 (Cranbrook) ends in its present form in March 2021. From that point, having supported over 350,000* home purchases, it will be restricted to first time buyers only and be subject to regional price caps. It will close completely in 2023.

Whilst few small house builders signed up to the scheme, Help to Buy has been central to the success of the major house builders over the last decade, including London after the loan limit within the capital was raised to 40%. However its withdrawal will, in our view, have limited effect, especially in the higher quality market, being more than outweighed by record low fixed interest rates and lower minimum deposit requirements. Indeed, buyers able to take advantage of these factors and Help to Buy are in an unusually good position. Get it while you can!

Moving Targets

Rapid change is the order of the day as Coronavirus impacts develop. Here are some key points at the time of writing.

Mortgage Holidays

When the mortgage repayment holidays scheme was announced, the government stressed it would not have an adverse effect on borrowers’ credit reports. Even so, having spoken to lenders, it is clear to us that, if you require new finance in the near future, a repayment holiday will make your application less attractive. Switching to interest-only, or remortgaging elsewhere, might be better.

STRICTER MORTGAGE CRITERIA FOR SELF-EMPLOYED

Metro Bank has announced that self-employed applicants will need to “demonstrate the sustainability and profit of the business”. Details are not given, but the intention is clearly that applications from the self-employed will be subject to more rigorous assessments. HSBC have made a similar announcement and we expect others to follow suit. Indeed, lending criteria is tightening across the spectrum, with most lenders now excluding bonuses, commission and overtime as an eligible sources of income for all bar NHS employees.

RATES RISE ABOVE 1% FOR TRACKER MORTGAGES

The best rate for tracker mortgages has risen dramatically from 0.84% to 1.24%, eroding any gains from the two Bank of England emergency rate cuts. This fits into the pattern we are seeing of lenders looking to de-risk. Unlike after the 2008 financial crisis, banks have liquidity and can lend. Their desire to increase margins indicates their longer-term view of the market and the stress it is going to be put under. This makes fixed rate mortgages a better option for borrowers.

For independent advice, contact Private Finance on 0870 600 1650 or jackson-stops@privatefinance.co.uk. www.privatefinance.co.uk