New-build finance will be next crisis.
Posted on September 14th 2009
Following on from my comments last week about a long awaited upsurge in new housing starts I am concerned about how these new builds are going to financed. Obviously house builders and developers will need to sell these properties to prospective home owners or investors and we are all too aware of the tightness of mortgage finance available. Add to this the almost universal shift by lenders away from new build properties due to concerns about fraud and you have a conundrum.
The Country needs more houses desperately but without willing lenders to finance borrowers, who exactly is going to be able to buy them? The potential problem is some time off yet as it will take a couple of years for these new properties to hit the market in any great numbers. However, the sales activity will start well ahead of this, one wonders what incentives will be invented in order to entice would be buyers. Will the government launch a scrappage scheme similar to that which appears to be re-invigorating the new car market? Of course this is not a serious suggestion, but I will be intrigued to see what the house builders come up with.
Let’s hope by the time these properties come to market lenders will have the confidence that they will no longer be fooled by questionable incentives offered by many in the housebuilding market.
