Our Relationship Director, Mark Roberts discusses private housing construction sector activity and the year-on-year increase of 28% on LDS Sales Guarantees issued in Q1.
The new build housing market continues to grow…
The article below was included in FIBA Advantage Online’s April edition.
According to the S&P Global/Cips UK Construction Purchasing Managers’ Index – which measures month-on-month changes in total industry activity – new orders in the construction sector increased in March, with the fastest rise in total construction orders recorded since August 2021.
The latest ONS Output in Construction stats published in April show that new private housing work increased by 0.5% (£17 million) in February 2022, and new private housing work is the only sector of construction sector except for infrastructure which is above pre-Covid levels.
As a relatively new entrant to the market, we’re pleased to say that LDS Sales Guarantees – an offering that guarantees sales for SME housing developers and their lenders – continues with its steep and steady growth trajectory.
In the first quarter of 2022 we issued £778m of Sales Guarantees proposals – a year-on year increase of more than a quarter (28%) on the £608m of Sales Guarantees proposals we issued in Q1 of 2021. This quarter’s Sales Guarantees have been issued to SME housebuilders across a diverse geographical spread, equivalent to 103 locations, and a total of 2,114 new homes.
The demands of the market
LDS created LDS Sales Guarantees to enable SME housebuilders to accelerate and increase output. By entering basic project details into an online proptech engine, a house builder or broker can generate an instant Sales Guarantee proposal, which includes the price that LDS will pay for the properties and the deposit that will be released.
The Sales Guarantee is then signed preconstruction, providing assurance that LDS will purchase any unsold homes on a site. At the same time, it releases a 10% cash deposit to the housebuilder, unsecured and at 0% interest.
The effect is that SME housebuilders can spread their equity further and build more, whilst their lenders have the confidence to lend more with their repayment guaranteed. In some cases, this combination unlocks new developments, which wouldn’t otherwise have been commercially viable.
In 1988, SMEs delivered 39% of all new homes in England. By 2020, this had dropped to just 10% – a fall of 74%. One of the key barriers to SMEs building more is the availability of sufficient funding for their development projects. According to a recent House of Lords report from the Government’s Built Environment Committee, increasing access to finance for SMEs is a “crucial element in meeting housing demand”.
Stimulating output and accelerating growth
LDS has a mission to empower SMEs with the resources of larger national housebuilders to help build a broader base of housing supply. To this end, LDS is currently developing LDS Boost, a free, interactive online platform providing access to knowledge, a network of useful contacts, and tools to maximise efficiency and profits.
Independent analysis by Savills and Chris Walker, former Treasury economist and MHCLG Senior Economic Advisor, found that Sales Guarantees could help restore SME housebuilding to historic levels, bringing forward up to 55,000 additional new homes and supporting nearly 200,000 jobs in the construction industry.
As the country continues to navigate challenging economic times, we are continuing to develop the LDS Sales Guarantee product to maximise impact. By increasing the financial viability of development projects, we can empower SME housebuilders, lenders, and brokers, to deliver additional new housing supply.
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