New homes reservations hit record high in Q3

New build homes are sharing in the remarkable recovery of the UK housing market with more rural locations currently the biggest beneficiaries of this jump in demand, according to a new report from real estate advisor, Savills.

Across the housing market, the number of sales agreed in September 2020 was 92% higher than in the same month last year while Savills new homes reservations in Q3 represented the highest quarterly total ever recorded.

The rebound has been boosted by pent-up demand, the stamp duty holiday and the experience of lockdown. City centre living remains popular, but many buyers are reassessing their needs and seeking more space in less urban surroundings. Areas that have seen double the number of sales agreed in the four weeks to 21 September compared to the same period last year include key commuter markets such as Guildford and St Albans as well as more rural hotspots like Aberdeenshire and South Hams.

Equity-rich homeowners are benefitting more than first-time buyers as banks shift their focus to lower risk lending due to the economic environment and the increase in mortgage applications, Savills said. The number of 90% loan to value mortgage products on the market reduced by 92% between March and August 2020. This dynamic may further boost the new build market as first-time buyers with lower deposits are likely to be drawn to schemes such as Help to Buy or shared ownership.

The quest for more room inside and out has seen the proportion of Savills new build buyers who are upsizing jump from 34% of the market in 2017 to 50% in the first half of this year. Developers could be well placed to respond to shifting requirements for working from home and access to green space. Flexibility in design will be key to allow homes to adapt – this will be particularly important in smaller family houses and flats where household members may need separate space at the same time.

George Cardale, Savills UK head of residential development, said: “There’s no doubt the housing market has experienced a significant recovery. Agreed sales have increased across the UK, but so have price reductions – suggesting the market is price sensitive.  And on a weekly basis, the rate of growth in sales has started to slow.

“Despite this, demand is likely to be sustained throughout the first part of next year in the run-up to the end of the stamp duty holiday, and towards the March and May deadlines for Help to Buy completions under the current criteria.  This is likely to be in the face of a harsher winter economically with the ending of the furlough scheme and returning uncertainty around Brexit.

“Beyond that point, the strength of the economy is likely to become more relevant to the housing market again.  Though if banks continue to be risk-averse this may continue to benefit the lower end of the new build market, especially for those able to use Help to Buy and shared ownership.

“We understand that reservations need to be taken by 15th December of this year and be build complete by 28th February 2021 in order to comply to the current Help to Buy rules, so time is running out for non-first time buyer users.’’

Gaby Foord of Savills Residential Research added: “The restriction of construction activity in April and May means that we expect the overall supply of new homes in England in the year to March 2021 to be between 15 and 20% lower than this year. That points to an ongoing undersupply of housing in some markets, notably those in London and the South of England which are most stretched in terms of affordability. And low levels of new schemes starting construction this year suggests that shortfall is likely to continue in the medium term.”