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As part of the largest single investment in affordable housing in a decade, the Government recently announced £8.6bn funding for the Affordable Homes Programme.
The government announced funding worth £8.6 billion to be allocated across the country. This funding will help deliver around 119,000 homes, 57,000 for ownership, 29,600 for social rent and 6,250 affordable rural homes. Homebuilders, SME developers, and other businesses that serve the housing industry, such as electricians and plumbers, will also benefit from the programme. In total, the funding could sustain up to 370,000 jobs nationwide. Additionally, this will generate up to £26 billion in additional private and public investment.
The Affordable Homes Programme will give a huge boost to those stepping onto the property ladder. Around half of the new homes will be available for homeownership, helping first-time buyers get their foot on the ladder. This is following plans such as the First Homes scheme, offering new homes at a 30% discount on the open market value, in addition to the 95% mortgage guarantee scheme, which helps first-time buyers secure a mortgage with just a 5% deposit.
Nearly 30,000 homes will be built for Social Rent, which is typically 50 to 60% of the market price. Thus, providing secure, inexpensive housing to those who need it most. It will also provide new supportive housing for some of the most vulnerable people, giving much-needed homes for the elderly and disabled. The funding is a crucial step toward the government’s goal of building 300,000 new homes per year by the mid-2020s.
What is happening?
During the first lockdown, there was an 11% fall in home completions. The supply of new homes and the construction industry was hit hard by this. As a result, there is a huge shortage of homes, with the number of property listings dropping to the lowest levels on record.
Meanwhile, while supply is exceptionally low, demand is unusually high. Driven by the stamp duty holiday and pandemic-induced search for space, the property market has been particularly active. According to Zoopla, one in 20 homes changed hands during the past year. Additionally, the pace of property sales is accelerating even faster, with homes taking just 26 days to sell. This is almost half the time taken in 2019 (49 days).
The result of this? A huge imbalance between supply and demand. This has put a huge upward pressure on prices, which has driven many buyers out of the market. According to Zoopla, the average home increased in value by 6% in the year to the end of July. This price rise is more than double the 2.3% rate of annual growth recorded in July 2020 last year.
What impact will the affordable homes programme have on the property market?
As a result of the Affordable Homes programme, thousands of people will be helped onto the housing ladder. Homeownership will become a reality for many people and families. It will become a lot more affordable than it is currently. Therefore, those on the lowest incomes will be able to enjoy good quality, secure homes. Consequently, this will give a huge boost to the property market and create plenty of opportunities for affordable housing investment.
As we know, low supply and high demand create a perfect investment market. Therefore, investors may be concerned that increased supply will create a drop in property prices. However, property investment is also a long game. Essentially, the longer you hold onto your property before eventually selling, the better. Despite peaks and troughs, prices will continue to climb over a longer period of time. According to CompareTheMarket, property investors who buy now could see average capital gains of around 30.3% if they sell in 10 years.
Therefore, if you are looking to invest in property, now is still an ideal time. Following the 2008 global financial crisis, the government’s response was to minimise costs. Now, as we live through the economic fallout from COVID-19, it is about building back better. The government are doing this by creating more desirable, environmentally, and socially sustainable properties – building to the tenant’s needs. Therefore, with such a large number of new properties being built, now is an ideal time to invest in newer, off-plan property.
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