Will the housing market benefit from the National Housing Bank?

The government asserts that the construction of 500,000 homes will be financed by its "housing bank"

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The government recently announced a new "housing bank" in an effort to stimulate the real estate market, but is it addressing the underlying problems?

By the end of its parliamentary term in 2029, the Labour government aimed to construct 1.5 million homes, one of the main promises in its general election manifesto.

Even though recent data indicates growth is slowing, many buyers have lamented that high house prices are preventing them from moving up the property ladder.

There is a claim that increasing the number of dwellings will increase supply and lower prices, making real estate more accessible.

The government has devised a method to assist in financing development and has reformed the planning system to make it easier to construct.

Plans for a National Housing Bank, a division of Homes England, were unveiled last night by the Ministry of Housing, Communities, and Local Government. The bank is expected to construct 500,000 new homes.

Angela Rayner, the housing secretary and deputy prime minister, stated: "We are moving quickly to ensure that a generation is no longer excluded from homeownership or that children are not forced to grow up in inappropriate temporary housing but rather have the safe and secure home they deserve.

But there is already a lot of real estate available, and many people lament that the high stamp duty rates prevent them from relocating, which begs the question of who will gain from the National Housing Bank.

The National Housing Bank: what is it?

With the goal of accelerating homebuilding and leveraging in 53 billion more private investments, the National Housing Bank, a publicly owned organization, has been supported with 16 billion in financial capacity in addition to the 6 billion in existing funding that will be allotted this parliament.

It will provide a variety of guarantee, equity, and debt products to help small and medium-sized business (SME) home builders with their projects.

Additionally, the organization will supply the low-interest loans that were announced during the Spending Review in order to facilitate the construction of more affordable and social housing.

Is the National Housing Bank going to support the real estate market?

Though analysts say that execution is crucial, anything that increases supply and lowers the cost of real estate is welcome.

Simple Fast Mortgage principal Rob Peters stated: "The concept of a National Housing Bank is encouraging, particularly if it actually makes money available to regional and SME home builders who frequently face financial obstacles.

Price pressures might be progressively reduced by supporting supply at scale, especially in regions that are consistently undersupplied. As usual, however, execution is the crucial issue. We have witnessed numerous ambitious government-sponsored housing projects come to a standstill because of bureaucratic delivery, planning bottlenecks, and red tape. It won't make a difference if this turns into just another attention-grabbing plan that doesn't get things done quickly.

However, the news might not be entirely positive.

Since new construction homes are frequently more expensive than used ones, this could actually raise prices.

The managing director of EHF Mortgages, Justin Moy, stated: "While the new strategy is commendable, will this actually happen in practice? Increasing the supply of real estate has been a puzzle for the past 20 years or so, with no year surpassing 250,000 since 2004.

"Any expansion in the housing stock will help control prices in areas where demand is much higher than supply, enabling developers to complete abandoned sites with low-cost funding. Homebuilders were likely the winners, contributing to higher profits in a similar manner to how Help to Buy has increased sales over the previous 15 years. However, given the lack of skilled and trained trades, a lot of this seems more like fantasy than reality.

Other critics might also bring up recent data from real estate websites like Rightmove and Zoopla, which actually indicate that supply is oversupplied and has fallen behind demand.

Some critics argue that listing prices and purchase costs like stamp duty are the real problem, not supply. The government recently changed the stamp duty thresholds, which has made this worse.

The Kushman Group's property developer, Kundan Bhaduri, stated: "Get the government to cut stamp duty, deregulate planning to unleash SME builders rather than just feed the giants, and let capital flow where genuine demand is, instead of state diktats."

"If not, we're merely affording a more costly form of supply constipation.