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© Acritas Research Ltd 2013 1Watson Burton Thought Leadership
Help to Buy Research
Thought Leadership ResearchWatson Burton
© Acritas Research Ltd 2013 2Watson Burton Thought Leadership
Agenda
Aim Context Attitudes to Help to Buy and its impact Summary and conclusions/ implications
© Acritas Research Ltd 2013 3Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 4Watson Burton Thought Leadership
Context
© Acritas Research Ltd 2013 5Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 7Watson Burton Thought Leadership © Acritas Research Ltd 2013 7
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%
© Acritas Research Ltd 2013 8Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 9Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 10Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 11Watson Burton Thought Leadership © Acritas Research Ltd 2013 11
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
© Acritas Research Ltd 2013 12Watson Burton Thought Leadership © Acritas Research Ltd 2013 12
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%
© Acritas Research Ltd 2013 13Watson Burton Thought Leadership © Acritas Research Ltd 2013 13
Top 3 barriers 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 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% *
© Acritas Research Ltd 2013 14Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 15Watson Burton Thought Leadership © Acritas Research Ltd 2013 15
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
© Acritas Research Ltd 2013 16Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 17Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 18Watson Burton Thought Leadership
Attitudes to Mortgage Guarantee
Jury’s out – but hopeful!
Housebuilders and experts
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
© Acritas Research Ltd 2013 19Watson Burton Thought Leadership © Acritas Research Ltd 2013 19
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)
© Acritas Research Ltd 2013 20Watson Burton Thought Leadership © Acritas Research Ltd 2013 20
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
© Acritas Research Ltd 2013 21Watson Burton Thought Leadership
Perceived impact of HTB
Housebuilders and experts
“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
© Acritas Research Ltd 2013 22Watson Burton Thought Leadership
Perceived impact of HTB
Housebuilders and experts
“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 .......
© Acritas Research Ltd 2013 23Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 24Watson Burton Thought Leadership
Meeting Help to Buy targets
Housebuilders and experts
?
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
© Acritas Research Ltd 2013 25Watson Burton Thought Leadership
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
Housebuilders and experts
© Acritas Research Ltd 2013 26Watson Burton Thought Leadership
Maximising Help to Buy
Housebuilders and experts
“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
© Acritas Research Ltd 2013 27Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 28Watson Burton Thought Leadership
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?
© Acritas Research Ltd 2013 29Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 30Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 31Watson Burton Thought Leadership
Appendix
© Acritas Research Ltd 2013 32Watson Burton Thought Leadership
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
© Acritas Research Ltd 2013 33Watson Burton Thought Leadership
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%
© Acritas Research Ltd 2013 34Watson Burton Thought Leadership
Omnibus sample - continued
Base Omnibus survey 2009
Online survey of 2009 – conducted 10-12 July 2013Demographically representative sample
Rent free
Rented from a housing association
Rented privately
Rented from the council
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%
© Acritas Research Ltd 2013 35Watson Burton Thought Leadership © Acritas Research Ltd 2013 35
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%
© Acritas Research Ltd 2013 36Watson Burton Thought Leadership © Acritas Research Ltd 2013 36
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'?
Base: Omnibus survey those hoping to, or have already considered, taking out a mortgage/ remortgage 564
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%)
© Acritas Research Ltd 2013 37Watson Burton Thought Leadership © Acritas Research Ltd 2013 37
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?
Base: Omnibus survey those hoping to, or have already considered, taking out a mortgage/ remortgage 564
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%)