Product innovation will help restore housing sector

Prior to the economic downturn, new houses were being built at a steady rate to meet growing demand. This need then declined as a result of a drop-off of available funds, primarily due to the fact that buyers were unable to gain a mortgage – and housebuilding projects filtered off too. While this was to be expected, the sharp rate at which this occurred certainly wasn’t.

Looking back at the effect the last recession (1988-92) had on housebuilding, the volume reduction was around 29% over four years. By contrast, the reduction between 2007-2009 has been around 40%, highlighting just how much the market has been affected by the current economic downturn.

The recent Housing Market Intelligence conference discussed the ‘mistakes’ housebuilders made in the lead-up to the credit squeeze. It’s now recognised that too strong an emphasis on high density schemes, particularly small apartments, left housebuilders exposed when first-time buyers suddenly found themselves unable to get a mortgage.

The construction of family homes has been, to a large extent, ignored by many for some years, which in times of boom resulted in inflated prices due to the simple workings of supply and demand. With many small apartments now standing empty, and fewer first-time buyers able to get onto the property ladder, restoring the right mix of properties should be a key objective for the industry.

This is particularly important when you consider how the economic crisis has changed the demographic of the first-time buyer, whose average age is now 37. On this basis can it be sensibly assumed that the first-time buyers of today are more likely to be looking for a family home, rather than a bachelor pad, for example. If this is the case, the industry needs to be in a position to meet this changing demand.

Of course, this is also against a backdrop of the Council of Mortgage Lenders’ continuing reluctance to release mortgages to new buyers, meaning now, more than ever, affordable homes are key.

This is where suppliers can play their part. Innovation will be crucial in delivering the right mix of properties that are not only realistically priced, but that also meet increasing environmental targets. By suppliers working closely with housebuilders to provide the right product, market stability can be achieved.