How will the recent rise in construction and the decline in mortgage approvals affect estate agents?

This week sees a massive rise in building construction in the UK, housing prices are on the increase in London again, but nationally mortgage approvals are falling. So what does this mean for the industry?

Schemes such as the "Help to Buy", launched last year, helped to fuel a sharp rise in house prices. They have also boosted the rise in construction and house building projects, as UK house builders feel more comfortable releasing cash to fund new builds. This new confidence in the UK economy has increased demand for new homes, particularly in London and the south east, whilst also fueling construction projects across the country as a whole.

However, the implementation of the stricter mortgage guidelines in April, came just as the recovery in mortgage lending appeared to be faltering. This has unfortunately threatened to slow down a housing market which had been bouncing back into life over the last year, as the industry is forced to adjust to these new conditions.

Precisely how the mortgage lenders will respond in the long term is not yet clear, but a number of lenders have already tightened and adjusted their systems. The Financial Conduct Authority expects its new rules to keep a lid on mortgage lending and this may well result in a drastic reduction in the offers available to homeowners and will likely test the fluidity of the market.

So how are these factors likely to affect estate agents and how will the industry need to adapt to accommodate these changes?

The most immediate and most significant impact are the delays being experienced by buyers, in obtaining mortgage offers from lenders. This significantly lengthens conveyancing times and causes huge frustrations for both buyers and sellers. Buyers report that they have had to reduce their current mortgage, but have still been unable to secure a new mortgage at a lower figure, due to the new compliance regulations.

The increased difficulty that first time buyers are experiencing in trying to obtain a mortgage, coupled with the decline in interest-only mortgages, also serves to shut out many young families from entering the housing market. Although the recovery in the housing market has been very strong over the last few months, all of these issues could easily precipitate another period of stagnation.

These factors combined, indicate that the growth in property rental will continue to rise, and that the greater proportion of property sales will be to Buy­to­Let customers. As property continues to be a sound financial investment for those that can both afford it and meet the new lending criteria, estate agents may do well to focus on this sector of the market, in order to guarantee higher value sales.