New build market in UK stronger than second hand market, new analysis suggests

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The new build housing market in the UK has remained in decent shape over the last three to six months, while the second hand market has remained subdued, according to new research.

Sector share prices have largely followed this pattern, with house builders up 5% in the last three months and estates agents down 2%, however, the last month has seen weak performances from both sectors, the analysis from independent stockbrokers Peel Hunt shows.

Nervousness about the Brexit negotiations and the outcome of the reviews into Help to Buy (HTB) and leaseholds have weighed heavily on firms, however the report suggests that concerns over HTB and the leasehold issue have been overdone, and that the risk to the new build sector from both is modest.

The firm believes that the Government will make changes to the HTB scheme with modest cuts to equity percentages and house price limits, but that it will be extended out beyond 2021, maybe as far as 2027.

On leaseholds, it suggests that the Government will adopt the Nationwide Building Society’s proposals of ground rents being set at no more than 0.1% of the selling price, and any increase must be RPI or less. ‘If this was the case, the impact on the sector would be minimal, although we suspect old leaseholds with excessive inflators will need to be rectified,’ the report explains.

It also points out that land prices remain subdued due to the planning changes brought in by the Government. With house prices rising enough to offset the build cost pressures, the outlook for margins remains healthy.

But traditional estate agents are being squeezed. The report says that weak transaction volumes, ongoing fee pressure, and the threat of losing a chunk of income from lettings fees continue to weigh heavily and there are few signs of any significant pick-up in activity.

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Written by: Houseladder