Growing through the cycle

Paul Turton, Head of Sales – Development Finance, United Trust Bank

Whichever house price index you happen to follow, most of them seem to have a common theme right now; house price growth is slowing and in some areas of the country, we’ve seen some falls.

One of the most widely reported index, that issued by Nationwide, stated in it’s June release that growth had hit a 5-year low, that UK annual house price growth dropped to 2% and that the highly influential London market was the weakest performing region in Q2 with prices down 1.9% year on year.

Why then has United Trust Bank continued to grow its development finance team in the face of an apparently cooling residential market and headwinds of Brexit? The answer is simple. Despite what national indices suggest, there are always regions, towns, boroughs, even individual developments where there remains a strong demand for the right sort of properties, presented correctly and priced sensibly. On a national level, we are a population of around 66 million people with net population growth in excess of 300,000 pa. As such, housing remains structurally under supplied so ‘affordability’ underpinned by help to buy and a healthy retail mortgage market is our barometer of the housing market.

The June House Price Index from LSL may surprise some people. Much of the market slowdown has been attributed to lower activity in London and the South East. It’s in these areas where the higher prices mean more would have been deterred by the increasing stamp duty on properties above £1.5m that were introduced in 2014 as well as the extra 3% charge on second homes.

LSL, which uses Land Registry data, put annual house price growth at 2.1% across England and Wales (it does a separate index for Scotland) but at the slightly lower rate of 2.0% if you remove London and the South East. Yes, you read that correctly. In the 12 months to June 2018, house price movement in London and the South East made a positive contribution to their national house price growth figures. I bet you weren’t expecting that.

Two thirds of England and Wales’ unitary authority areas – 72 out of 108 – continued to record annual price rises in May. Areas where prices have dropped are mainly in either Wales (8 of the 36) or in the South, with 8 in the South East and 5 in the South West. However, prices in East Sussex grew by an average beating 7.8% over the last year and West Berkshire by 5.1%.

With house price movement and sales activity appearing to be unpredictable at present, we believe house builders need development finance lenders like us more so now than they have done in the last five years. That’s why we’ve continued to expand, with more originators serving more house builders in more parts of England and Wales than ever before.

At times like these, house builders need some certainty. Engaging with a dependable ‘through the cycle’ specialist lender will enable them to keep building homes and their businesses through the ups and downs of the economy.