Help To Buy Reasearch

Help to Buy Research
Thought Leadership Research
Watson Burton

© Acritas Research Ltd 2013

Watson Burton Thought Leadership

1

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



2

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



3

Context



4

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



5

Public attitudes to renting & buying
 Q.8 To what extent do you agree/disagree with the following?

 Buying is preferred to renting, but renting gives greater
flexibility, future prices are too uncertain & may not lead to
increasing wealth
Agree (8-10)

Neutral (4-7)

Buying is better than renting

Renting is more flexible than buying

41%

Renting is better than buying

Important to get on the property ladder
Buying is important part of future planning

12%

7.3

9%

7.3

9%

6.7

51%

34%

49%

24%

17%

55%
44%

6.1

19%

57%

20%
10%

7.3

38%

54%

6%

31%

58%

Future house prices are too uncertain

Now more acceptable to rent than it was

40%

54%

Home ownership no longer = increasing wealth

Mean

Disagree (1-3)

5.6

24%
45%

5.3
4.0

Base: Omnibus survey All 2009



6

People still want to buy
 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
Owned outright

Owned with a mortgage

Rented from the council

Rented from a RSL

Rented from someone else

Rent free

Tenur
e

33%

32%

14%

6%

13%

% wanting to remortgage:

13%

20%

12%

14%

27% 0%

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

9%

29%

12%

8%

29% 16%


Base Omnibus survey 2009/2009/


7

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:
Help to Buy transactions:

Housing starts

Mortgage lending

House prices

3.1%
17%

15%

~ 10,000 since
launched


8

Housebuilder views of the
market pre-HTB
The constraint on mortgages has been an encumbrance
to sales.” Graham Cope , Redrow
“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
“Levels of new
mortgage
advances had
massively
decreased”
Anon

“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

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


9

Housebuilder views of the
market schemes pre-HTB
NewBuy and builders’ shared equity schemes - limited success
 Too restrictive and difficult to administer
 Negative impact on housebuilders’ balance sheets
“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


10

Top barriers to buying
 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?

 High property prices, mortgage availability and difficulty
in qualifying are the top barriers
22%

High property prices

56%
27%

Lack of mortgage deposit

51%
16%

Difficulty in qualifying for mortgage

44%

8%

Lack confidence in sustaining…

28%
6%

Lack of suitable property
Lack of mortgage availability
Risk of home value falling
Other
No barriers

23%
3%
20%
2%
13%
8%
10%
9%
9%

Single barrier
Top 3 barriers
BASE: Omnibus survey those considering moving
and those hoping to mortgage/ remortgage 564



11

Single greatest barrier by tenure

Owned
outright


Owned with
Rented from a
a mortgage Rented from housing
or loan
the council
association

Rented
privately

8%

18%

43%

27%

50%

Difficulty in qualifying for
mortgage
Lack confidence in sustaining
payments

24%

25%

14%

31%

18%

12%

12%

27%

22%

20%

3%

12%

9%

3%

4%


10%

6%

5%

3%

3%


6%

4%

-

3%

2%


3%

2%

-

2%

2%

No barriers

8%

18%

43%

27%

50%

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



12

Top 3 barriers by tenure

Owned
outright

Owned with
Rented from a
a mortgage Rented from housing
or loan
the council
association

Rented
privately


55%

52%

55%

62%

68%

Difficulty in qualifying for
mortgage
Lack confidence in sustaining
payments

19%

40%

85%

74%

78%

29%

39%

51%

54%

63%

22%

32%

33%

26%

25%


34%

27%

9%

16%

17%


25%

20%

11%

19%

21%


11%

18%

6%

9%

9%

No barriers

20%

11% -

3% *



13

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

 Main impacts are securing mortgages, increased concern
about children’s future and retaining any disposable income
Agree (8-10)

It has become much more difficult to get a
mortgage to buy a home
I am more likely to worry about my children's
ability to buy a home
I am less likely to have money left over once
I've paid my basic living expenses
I am more likely to worry about keeping up
my mortgage payments
I am more likely to worry that I will never get
on/up the property ladder
I am more likely to worry that the value of the
home I buy will fall
It has had little effect on me

Neutral (4-7)

Disagree (1-3)

49%

24%

37%

25%

23%

27%
25%

12% 4%

39%

6.3

41%

12%
40%

6.9
6.5

35%

11%

40%

7.4

33%

10%

Mean
7.8

24%

37%

25%
17%

3%

6%

47%
27%

Not applicable

6.2

23%
4%

4.5

Base Omnibus survey All 2009



14

Current experience of Help to Buy
 Q.7 Which of the following best describes your current situation?

Applied and
Especially 35-44 yr olds (11%);
accepted Applied and
rejected
and males (6%)
4%
4%
Don't
know
12%
Not applied
Especially renters (41%) ...
yet but
intend to
... and younger people:
within 2
years
 18-24 yr olds (43%) and <45
25%
Do not
yr olds (32%) more likely
intend to
than 45-64 yr olds (9%)
apply
55%

Especially 18-24 yr olds (17%)

Especially homeowners (67%)...
and 45+yr olds (74%) ...
and C2 (70%)
18-24 yr olds (18%) less likely
than all others

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



15

Help to Buy

Helpfulness

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

18-24 year olds
C1
DE
Renters
HTB applicants/ intenders

Lower

C2

Lower

AB

Homeowners
55+ yr olds

Awareness

Higher


16

Builders’ attitudes to Help to Buy
 Something was needed!

Positive

Helped increase funding availability
Lenders responding positively to HTB
Better than NewBuy/ First Buy
Helped to rebuild confidence and
competition in the mortgage market
Enquiries, 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?

Negative

Housebuilders and experts



17

Attitudes to Mortgage Guarantee
 Jury’s out – but hopeful!

Positive

Expected to involve a range of lenders
Lenders offering “decent rates and not
restricting it through other mechanisms” Anon
Hope offers may be designed to assist the
second hand market
Controls 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?”


Negative


18

Impact of HTB on public attitudes
 Q.8 To what extent do you agree/disagree with the following?

Mean (1= totally disagree; 10=totally agree)

 Those thinking HTB will help them appear more positive about
renting and concerned about future house prices than others
9

Renting is better than buying
8

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

7

6

5

4

3

Public opinion Those hoping
Those
Aware of HTB Think HTB
to get a
considered
can help them
mortgage in
taking a
next 2 years mortgage in
Base Omnibus survey all 2009, hoping for a mortgage 299, considered a
last 5 years

mortgage 302, aware HTB 315, Think HTB will help 91



19

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

Mean (1= totally disagree; 10=totally agree)

 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
8

It has had little effect on me

7.5
7

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

6.5

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

6
5.5

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

5
4.5

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

4
3.5
3

Public opinion Those hoping
Those
Aware of HTB Think HTB
to get a
considered
can help them
mortgage in
taking a
next 2 years mortgage in
last 5 years

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

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



20

Perceived impact of HTB
 Overwhelmingly positive
“Things have been improving in the mortgage market over
the last period.” John Slaughter Director of External Affairs HBF
"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

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

Belsham, Taylor Wimpey

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



21

Perceived impact of HTB
 Overwhelmingly positive, but .......
“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



22

HTB – bubble?
 Not really expected....
 Controls in place
 New builds only
 Market so depressed before

“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

“I think the bubble position is
overstated but it is not entirely
wrong.” Anon
“Risk of serious damage to the
market” John Anderson, Kier Group

 But major concerns about how Help to Buy ends


23

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


24

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




25

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




26

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



27

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?


28

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



29

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



30

Appendix



31

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



32

Omnibus sample
 Online survey of 2009 – conducted 10-12 July 2013
 Demographically representative sample
18-24
12%

25-34
17%

35-44
17%

45-54
18%

Not working but
seeking
employment
5%

55-64
15%

65+
22%

Not working and
not seeking
employment/sick
6%
Retired state pension
6%

Working full time
45%

Working part
time
12%

Retired - private
pension
19%

49% Male
51% Female

DE
24%

C2
22%

AB
27%

C1
27%

House person
7%

Base Omnibus survey 2009



33

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

Current tenure

Current location
14%

South East

33%

Owned outright
Owned with a
mortgage

32%

Rented from the
council

14%
13%

Rented privately

11%

North West

10%

Eastern
South West

9%

West Midlands

9%

6%
1%

Yorkshire &…

9%

Scotland

Rented from a
housing…
Rent free

13%

London

9%
7%

East Midlands

Village
15%

5%

Wales
North East

Hamlet &
Isolated
2%

4%

NET: Rural
17%

Urban Population
over
33%

Town and
Fringe
33%
Base Omnibus survey 2009



34

Single greatest barrier to buying

 Single greatest barriers are mortgage related and prices

27%


22%

Difficulty in qualifying for mortgage

16%

Lack confidence in sustaining…

8%

Other
No barriers

6%
3%
2%

8%
9%


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

35

Public awareness of HTB
 Q.5 Have you heard of 'Help to Buy'?

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



36

Public attitudes to Help to Buy
 Q.6 Do you think it could help you to buy a property in the next two
years?

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




37

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Editor's Notes