A leading construction industry body today voiced concerns over a recovery in housebuilding being all but extinguished when the Chancellor’s Help to Buy scheme to support the market ends in 2016.
The Construction Products Association also called for clarity from the Government of the future of the initiative as its latest forecasts predicted a sharp slowdown in new housing to just 2 per cent in 2016 – when Help to Buy is due to finish – following double-digit growth this year and next.
The association forecasts the overall construction sector, which accounts for around 6 per cent of the economy, will see annual growth speed up to 3.4 per cent this year – the best since 2010. The pace increases to 5.2 per cent in 2015, helped by major projects including Crossrail and the construction of the UK’s first new nuclear power station in a generation at Hinkley Point in Somerset.
But growth in private housing work is set to slow rapidly after Help to Buy, according to the body’s economics director Noble Francis. Since April last year the Chancellor’s Budget centrepiece was government loans of up to 20 per cent on new builds, funded by a £3.5bn pot to underwrite an estimated 75,000 purchases.
As of December, there were 18,000 reservations since April under the first stage of the scheme. “After 2015, without Help to Buy to support housing market demand, there are strong concerns about whether house building will continue to improve despite the clear need for new housing,” Dr Francis said.
Private housing starts in Britain declined more than 7 per cent to to just 94,000 in 2012, 35 per cent below the average of the last 20 years. By 2017 the association’s forecasts suggest 153,000 private housing starts and 30,000 public starts – only three-quarters of the 240,000 homes needed to meet the number of households created each year, according to the Office for National Statistics.
Dr Francis added: “2016 is a very big issue for the housing market. I think that for the housebuilders and the wider industry as well as mortgage lenders everybody would benefit if there was greater clarity for the medium term.”
The Bank of England, which is opposed to any extension of the scheme, is monitoring Help to Buy and can make recommendations to halt it if it judges risks to financial stability are growing. The Bank has already stopped banks from using its Funding for Lending scheme to access cheap cash to fund mortgage loans.