Help To Buy Reasearch

© Acritas Research Ltd 2013 1Watson Burton Thought Leadership

Help to Buy Research

Thought Leadership ResearchWatson Burton


Agenda

Aim Context Attitudes to Help to Buy and its impact Summary and conclusions/ implications


Aim

Provide material from which to develop materials to assist in raising Watson Burton’s profile amongst housebuilders and the wider construction market

‘Red tape over planning procedures and mortgage loans are hampering the growth of the house-building industry’ – alongside this, are we turning into a nation of renters, more in line with the European view of property ownership?.... What is the impact of Help to Buy?’

Sought Housebuilders’, experts and public opinion


Context


Housebuilders’ perceptions of public attitudes to buying

“Fundamentally people will still want to move, people will still want to buy new houses, people will still want to get onto the property market. It doesn’t matter whether the press ... say houses are too expensive. That is what people generally want, that is their psyche, they want to own their own property. So there isn’t any lack of demand.” Graham Cope , Redrow

© Acritas Research Ltd 2013 6Watson Burton Thought Leadership © Acritas Research Ltd 2013 6

Public attitudes to renting & buying

Buying is preferred to renting, but renting gives greater flexibility, future prices are too uncertain & may not lead to increasing wealth

Q.8 To what extent do you agree/disagree with the following?

Base: Omnibus survey All 2009

Buying is important part of future planning

Important to get on the property ladder

Now more acceptable to rent than it was

Renting is better than buying

Renting is more flexible than buying

Future house prices are too uncertain

Home ownership no longer = increasing wealth

Buying is better than renting

10%

20%

24%

34%

41%

54%

58%

54%

44%

55%

57%

49%

51%

38%

31%

40%

45%

24%

19%

17%

9%

9%

12%

6%

Agree (8-10) Neutral (4-7) Disagree (1-3)

7.3

7.3

7.3

6.7

6.1

5.6

5.3

4.0

Mean


People still want to buy

Tenure 33% 32% 14% 6% 13%

Owned outright Owned with a mortgage Rented from the council Rented from a RSL

Rented from someone else Rent free

Q.1 Are you hoping to take out a mortgage or re-mortgage to move home or buy your first home in the next two years (excluding buy-to-let)?

Q.2 Have you considered moving or buying home with the aid of a mortgage or buying your first home (excluding buy-to-let) at any point in the last five years?

33% already own outright & 32% are buying with a mortgage

15% hope to take out a mortgage/ remortgage in the next 2 years

18% of those who don’t hope to, have considered it before

20%

29%

Base Omnibus survey 2009/2009/

% wanting to re-mortgage:

% of those who don’t, who have considered it

13%

9%

12%

12%

14%

8%

27%

29%

0%

16%


The market

Land values remain low and the economy weak Increasing rate of private renting – up from 217k households p.a. in 2007 to

245k households in 2011 – but rents now more expensive than mortgages in half of the UK (and now deemed unaffordable for low income families in a third of Britain)

Government actively seeks to unblock planning hold ups through ‘Atlas’ 2,291 Home purchases completed under New Buy (to Mar 31st)

300 Reservations per week under Help to Buy - and since it started:

17%

Mortgage lending

15%

Housing starts

3.1%

House pricesHelp to Buy transactions:

~ 10,000 since launched


Housebuilder views of the market pre-HTB

Some players left the market/ merged and those left have less capital

“The overall mortgage pot has shrunk, very substantially, and if

there is less money available then clearly it is going to go to those parts of the market that are high

value and lower risk” Anon

“After the 2007 property bubble and subsequent crash, the market needed to rebalance. This happened between 2007 and late 2012.By the end of 2012, there was a good match between demand and availability.” John Anderson, Kier Group

The constraint on mortgages has been an encumbrance to sales.” Graham Cope , Redrow

“Levels of new mortgage

advances had massively

decreased” Anon

“The whole market had started to stagnate [due to] large deposits and restricted lending on mortgages....

There was a real shortage of first time buyer funding available. ” Kevin

Belsham, Taylor Wimpey


Housebuilder views of the market schemes pre-HTB

“We had NewBuy come in 18 months ago which was quite a difficult process with banks and mortgage lenders. That had an immediate effect, [but] slow

uptake ... The reasons are the fees payable etc.” Graham Cope , Redrow

“We saw an improvement in lending funding conditions in the UK mortgage market prior to the introduction of HtB, because the Funding to Lending scheme definitely lowered the funding rates on mortgage products... The house builders

introduced our own shared equity products to try and reduce the deposit requirement to something around 5%, with a 15-20% shared equity

contribution.... The problem that we had in the industry was we all had quite a lot of cash locked up in the balance sheet for these products. ” Anon

“The other problem was with us having to contribute half as well; you were basically spending a lot of your working capital. ” Anon

NewBuy and builders’ shared equity schemes - limited success Too restrictive and difficult to administer Negative impact on housebuilders’ balance sheets


Top barriers to buying

High property prices, mortgage availability and difficulty in qualifying are the top barriers

Q.3 What do you regard as the single greatest barrier to you buying a home? Q.4 What are the next two biggest barriers?

BASE: Omnibus survey those considering moving and those hoping to mortgage/ remortgage 564

No barriers

Other

Risk of home value falling

Lack of mortgage availability

Lack of suitable property

Lack confidence in sustaining payments

Difficulty in qualifying for mortgage

Lack of mortgage deposit

High property prices

9%

10%

13%

20%

23%

28%

44%

51%

56%

9%

8%

2%

3%

6%

8%

16%

27%

22%

Single barrier

Top 3 barriers


Single greatest barrier by tenure Q.3 What do you regard as the single greatest barrier to you buying a home?

Base: Omnibus survey those hoping to, or have already considered, taking out a mortgage/ remortgage 564

Owned outright

Owned with a mortgage or loan

Rented from the council

Rented from a housing association

Rented privately

Lack of mortgage deposit 8% 18% 43% 27% 50%

High property prices 24% 25% 14% 31% 18% Difficulty in qualifying for mortgage 12% 12% 27% 22% 20% Lack confidence in sustaining payments 3% 12% 9% 3% 4%

Lack of suitable property 10% 6% 5% 3% 3%

Lack of mortgage availability 6% 4% - 3% 2%

Risk of home value falling 3% 2% - 2% 2%

No barriers 8% 18% 43% 27% 50%


Top 3 barriers by tenure Q.3 What do you regard as the single greatest barrier to you buying a home?


Owned outright

Owned with a mortgage or loan



Rented privately

Lack of mortgage deposit 55% 52% 55% 62% 68%

High property prices 19% 40% 85% 74% 78% Difficulty in qualifying for mortgage 29% 39% 51% 54% 63% Lack confidence in sustaining payments 22% 32% 33% 26% 25%

Lack of suitable property 34% 27% 9% 16% 17%

Lack of mortgage availability 25% 20% 11% 19% 21%

Risk of home value falling 11% 18% 6% 9% 9%

No barriers 20% 11% - 3% *


Impacts of crash

Main impacts are securing mortgages, increased concern about children’s future and retaining any disposable income

Q.9 To what extent do you agree/disagree with the following statements about the impact of the financial crash on you?

Base Omnibus survey All 2009

It has had little effect on me

I am more likely to worry that the value of the home I buy will fall

I am more likely to worry that I will never get on/up the property ladder

I am more likely to worry about keeping up my mortgage payments

I am less likely to have money left over once I've paid my basic living expenses

I am more likely to worry about my children's ability to buy a home

It has become much more difficult to get a mortgage to buy a home

17%

25%

23%

27%

47%

37%

49%

39%

40%

25%

27%

37%

25%

24%

40%

12%

11%

10%

12%

6%

3%

4%

23%

41%

35%

4%

33%

24%

Agree (8-10) Neutral (4-7) Disagree (1-3) Not applicable

7.8

7.4

6.9

6.5

6.3

6.2

4.5

Mean


Current experience of Help to Buy

Especially 18-24 yr olds (17%)

Q.7 Which of the following best describes your current situation?

Base: Omnibus survey - All respondents who have heard of ‘Help to Buy 308’

Applied and accepted4% Applied and rejected

4%

Not applied yet but intend

to within 2 years25%

Do not in-tend to apply

55%

Don't know12%

Especially 35-44 yr olds (11%); and males (6%)

Especially renters (41%) ...

... and younger people: 18-24 yr olds (43%) and <45

yr olds (32%) more likely than 45-64 yr olds (9%)

Especially homeowners (67%)...

and 45+yr olds (74%) ...

and C2 (70%)

18-24 yr olds (18%) less likely than all others


Help to Buy

18-24 year olds

C1

DE

Renters

HTB applicants/ intenders

AB

C2 Homeowners55+ yr olds

Low

er

Hel

pful

ness

Hig

her

Lower Awareness Higher

Half of those who have or are actively considering buying a home have heard of ‘Help to Buy’ (52%) - under a third of these think it will help them


Builders’ attitudes to Help to Buy

Something was needed!

Housebuilders and experts

Helped increase funding availability Lenders responding positively to HTB Better than NewBuy/ First BuyHelped to rebuild confidence and competition in the mortgage marketEnquiries, off-plan sales & building rates Scope well designed

How sustainable is it?Funding may run out before the end of 3 yrs

What happens when it finishes?

Positive

Negative

“Good for housebuilders, but not for taxpayers.” John Anderson, Kier Group


Attitudes to Mortgage Guarantee

Jury’s out – but hopeful!


Expected to involve a range of lendersLenders offering “decent rates and not restricting it through other mechanisms” Anon

Hope offers may be designed to assist the second hand marketControls in place to avoid boom and bust

Scope too broad?Introduced too late

How long is the quota going to last?May lead to increased house prices

Hiding an underlying wider market fragility?“What happens towards the end of the scheme?”

Positive

Negative

T&Cs unknown Too early to say


Impact of HTB on public attitudes

Those thinking HTB will help them appear more positive about renting and concerned about future house prices than others

Q.8 To what extent do you agree/disagree with the following?

Base Omnibus survey all 2009, hoping for a mortgage 299, considered a mortgage 302, aware HTB 315, Think HTB will help 91

Public

opi

nion

Those

hop

ing

to g

et a

mor

tgag

e in

nex

t 2 ye

ars

Those

cons

ider

ed ta

king

a m

ortg

age

in la

st 5

year

s

Aware

of H

TB

Think

HTB ca

n he

lp th

em

3

4

5

6

7

8

9

Renting is better than buying Future house prices are too uncertain Home ownership no longer = increasing wealth Renting is more flexible than buyingNow more acceptable to rent than it was Important to get on the property ladder Buying is important part of fu-ture planning Buying is better than rentingM

ea

n (

1=

to

tally

dis

ag

ree

; 1

0=

tota

lly a

gre

e)


Impacts of HTB on perceptions of crash

Those thinking HTB may help them express greater concern about the future value of their home falling, getting on the property ladder and keeping up payments than others

Q.9 To what extent do you agree/disagree with the following statements about the impact of the financial crash on you?

3

4

5

6

7

8 It has had little effect on me

I am more likely to worry that the value of the home I buy will fall

I am more likely to worry that I will never get on/up the property ladder

I am more likely to worry about keeping up my mortgage payments

I am less likely to have money left over once I've paid my basic living expenses

I am more likely to worry about my children's ability to buy a home

It has become much more difficult to get a mortgage to buy a home

Mean

(1=

to

tally d

isag

ree;

10=

tota

lly a

gre

e)

Base Omnibus survey all 2009, hoping for a mortgage 299, considered a mortgage 302, aware HTB 315, Think HTB will help 91


Perceived impact of HTB


“Things have been improving in the mortgage market over the last period.” John Slaughter Director of External Affairs HBF

“Increased sales ... Help to Buy really helped the market” Tony Johnson Commercial Director Miller

"Definitely is stimulating house building. The equity loan ticks all the boxes for affordability of house purchases... it's given us a much more confident position than we were pre-budget” Kevin Belsham, Taylor Wimpey

“Virtually all builders in the UK are not building efficient delivery rates on sites, we have been constrained by demand ... on an average site we are building only 60% p.a. of what we would have built in the better days. There is huge potential to increase the number of plots completed on each site each year. So that gives confidence to get more efficient build rates.” Anon

Overwhelmingly positive

“We should get more normalisation, standard 90-95% mortgages coming back at more favourable rates..” Anon


Perceived impact of HTB


“We also need a functioning planning system and we need to tackle regulatory burdens on the industry.” John Slaughter Director of External Affairs HBF

“I see this as being not in place beyond May 2015 and the election” Anon

“I think there are a lot of things happening at the moment, not just Help to Buy” Graham Cope, Redrow

“[Lack of] capacity in terms of skills, bringing trades, sub contractors, suppliers. Also the ability to recruit good staff, as the industry lost a lot of good staff in the down turn.” Anon

“There will an impact on pricing, material pricing, impact on trades, impact on sellers and what they are going to get for their land... there have been issues with trades becoming more difficult to actually find... materials are becoming more expensive” Graham Cope, Redrow

Overwhelmingly positive, but .......


HTB – bubble?

Not really expected.... Controls in place New builds only Market so depressed before

But major concerns about how Help to Buy ends

?“Risk of serious damage to the market” John Anderson, Kier Group

“I think the bubble position is overstated but it is not entirely wrong.” Anon

“Some of the figures I've seen about potential price increases - there is absolutely nothing from our perspective to support those price increases” Kevin Belsham Taylor Wimpey


Meeting Help to Buy targets


?

Mainly driven by the larger builders

But achievement may be hampered by: Planning system Lack of land availability/ increased land prices Banks being too risk-averse Lack of skilled labour and rising materials prices Smaller builders’ ability to resource HTB

administration


Maximising Help to Buy

Builders already adapt their sales and marketing to take advantage of schemes – but a joined-up campaign may work better?

Help to Buy is seen as a significant improvement on earlier schemes, so very few suggestions made by builders: Include properties up to £1m? Speed planning decisions Increase land availability Maybe narrowing the scope of HTB towards the end of its life



Maximising Help to Buy


“It’s certainly a fantastic initiative ... and one that we're taking full advantage of.... It does everything - it targets first and subsequent buyers, it's well supported by all the lenders, it's well run by the Home Buy agents, it has a very simple process and its very easy to get approvals for the scheme. The administration runs like clockwork, there isn't actually any downside to it. .. There will have to be some form of tapering, towards the end of [Help to Buy] ...[But] there can't be a sudden drop off the cliff edge.” Kevin Belsham, Taylor Wimpey


Conclusions

We’re not turning into a nation of renters...people want to buy

True that the proportion of households renting has increased since the crash

But still lower than historic (1970) levels

And private renters and current mortgagees are the most likely to seek to move or buy a new home

Despite uncertainty over future house prices and an acceptance that home ownership no longer leads to increasing wealth, only marginally more people think renting is more acceptable now and buying is preferred to renting by the majority

The crash is perceived to have impacted negatively on securing mortgages, raised concern about children’s future ability to buy a home and retaining any disposable income after paying basic living expenses


Conclusions

Government actions are helping the market – in the short term

True that Government actions to unblock red tape and Help to Buy appear to be helping to boost purchases and housing completions but

Still much land remains blocked due to its valuation

Planning system, regulation and labour/ materials restrict house building

The greatest real and perceived barriers to buying remain lack of mortgage deposit, high property prices and difficulty in qualifying for a mortgage

HTB is designed to help to reduce the cash deposit buyers have to find

High prices – which particularly affect renters - are unlikely to be reduced through HTB

Will qualifying for a mortgage – which also affects private renters – be eased by HTB?


Conclusions

Help to Buy is helping – to a point ...

Half of those who have or are actively considering buying a home have heard of ‘Help to Buy’

But is it being appropriately targeted?

But only a third of those who have heard of ‘Help to Buy’ think it will help them to buy a property

Some intransigent perceptions

Builders think it will help in the short term

But fears over its sustainability

Too early to judge the mortgage guarantee impact


Conclusions

Expect to meet Help to Buy targets

A house price bubble is not generally expected – because:

Previously depressed market situation

Adequate controls are in place

Although there are split opinions amongst builders

The way the schemes are run towards their end appears critical to the longer term impact on the market


Appendix


Housebuilders and Experts (attributable only)

John Anderson, Kier Group Kevin Belsham, Taylor Wimpey Graham Cope, Redrow Steve Errington, Storey Homes Tony Johnson, Miller Patrick Law, Barretts Andy Nelson, HCA John Slaughter, HBF


Omnibus sample

Base Omnibus survey 2009

Online survey of 2009 – conducted 10-12 July 2013Demographically representative sample

12% 17% 17% 18% 15% 22%

18-24 25-34 35-44 45-54 55-64 65+49% Male 51% Female

AB27%

C128%

C222%

DE24%

Not working but seeking employment

5%

Not working and not seeking

employment/sick6%

Retired - state pension6%

House person7%

Working part time 12%

Retired - private pension19%

Working full time 44%


Omnibus sample - continued

Base Omnibus survey 2009

Online survey of 2009 – conducted 10-12 July 2013Demographically representative sample

Rent free


Rented privately


Owned with a mortgage

Owned outright

1%

6%

13%

14%

32%

33%

Urban - Population

over33%

Town and Fringe33%

NET: Rural17%

Village15%

Hamlet & Isolated2%

Current tenure Current location

North East

Wales

East Midlands

Scotland

Yorkshire & Humberside

West Midlands

South West

Eastern

North West

London

South East

4%

5%

7%

9%

9%

9%

9%

10%

11%

13%

14%


Single greatest barrier to buying

Single greatest barriers are mortgage related and prices

Q.3 What do you regard as the single greatest barrier to you buying a home?

BASE: Omnibus survey those considering moving and those hoping to mortgage/ remortgage564

Lack of mortgage deposit

High property prices

Difficulty in qualifying for mortgage

Lack confidence in sustaining payments

Lack of suitable property

Lack of mortgage availability

Risk of home value falling

Other

No barriers

27%

22%

16%

8%

6%

3%

2%

8%

9%


Public awareness of HTB

Half of those who have or are actively considering buying a home have heard of ‘Help to Buy’ (52%)

Q.5 Have you heard of 'Help to Buy'?


Especially: Males (58%) 55+ yr olds (70%) Public sector workers

(61%) AB (62%) Homeowners (56%)

Least known by: Females (47%) 18-24 yr olds (39%) Private sector workers

(46%) C2 (42%) Renters (47%)


Public attitudes to Help to Buy

Under a third of those who have heard of ‘Help to Buy’ think it will help them to buy a property

Q.6 Do you think it could help you to buy a property in the next two years?


More likely to think it will help them: 18-24 yr olds (57%) AB, C1, DE (31+%) Renters (41%) If already applied for

HTB (accepted100%; rejected 82%); or intend to do so (69%)

Least likely to think it will help them: 45 – 64 yr olds (8%) C2 (13%) Homeowners (23%)

Economy & Finance

Help To Buy Reasearch