Flat-pack housing becomes the new bricks and mortar for lenders

Flat-pack housing becomes the new bricks and mortar for lenders




.

The house is flat-packed and boxed, but is it sturdy enough to solve the UK’s housing crisis? 

 Non-traditional housing options, such as flat pack Ikea-esque constructions, are certainly not a new addition to the property market. The first Scandinavian-style timber-framed home became available to consumers back in 2007, and since then many companies, including Tesco, have hopped on the flat-pack home bandwagon. A recent report from the Royal Institute of Chartered Surveyors (RICS) has suggested that houses constructed from these sustainable materials could be the solution to the UK’s property crisis.
 
There is certainly a demand for an affordable alternative to bricks and mortar, especially amongst first-time buyers. Recently, an Oxfordshire family demolished their 78-year-old home and replaced it with a four-bedroomed flat-pack construction. The property shell cost £126,000 to purchase, so a considerably cheaper option to re-building their home by traditional means. Not only does this option, being constructed from recycled materials address environmental issues, it’s also exceptionally sustainable. Made from German hardwood, the home is expected to exceed a life span of 100 years.
 
Steve Turner, a spokesperson for Home Builders Federation (HBF), stressed the need for the housing shortage to be addressed, commenting: “There is an acute housing crisis in this country - we estimate a shortfall of a million homes. The Government's own household formation projections show we should be building around 230,000 homes a year. In 2009 we missed that by 100,000 and built less than any year since 1923.
 
“Indeed you have to go back many years to find a year when we got close to building the required number of homes. So any initiatives that help increase supply are very welcome.”
 their launch, the flat-pack homes were available at around £150,000 providing an inexpensive alternative. Marketed as affordable, easy to put together and fast to build, this development was anticipated to alleviate the housing market and resolve the problem of first time buyers being shunned from joining the property ladder due to extortionate house prices. According to Eugene Esterkin, Managing Director at Affirmative Finance LTD: “Flat-pack is well established in certain countries and although not particularly favoured in the UK, it does present an interesting and innovative option for the UK market.”
 
The success of the timber structure option will, to a certain extent, be dependant on the willingness of mortgage lenders to provide financial aid. Regardless of the healthy market demand, if mortgages are unattainable these types of properties and their feasibility as a market solution will be limited. Steve Turner added:“A lack of mortgage availability is the main constraint on supply. Hard pressed first-time buyers need assistance, and lenders have to return to lending on realistic terms. Recent months has seen planning permissions granted drop, threatening a worsening of the crisis in the future. The Government must also deliver on its promise to reduce regulation.”
 
“House building sites can simply no longer support all the costs levied on them by central and local Government. So whilst self-build homes may not be the mainstream housing supply solution, removing the barriers to self-building is.”
 
However, according to Eugene Esterkin, There is no reason why in principle Affirmative would not lend on flat-packs and indeed we are always happy to lend where there is an innovative and creative proposal which makes sense. The key factor would be the exit strategy since clearly the borrower would be looking for long term finance to replace the short term product which we offer.”
 
“We do get occasional requests (for loans on flat pack housing) and have in the past completed transactions for this and other cheap and fast housing solutions.”
 
Flat pack housing seems like a suitable option but individuals and developers could be faced with difficulties when trying to purchase land and obtain planning permission. The need for extensive building regulation control as ‘cowboy entrants’ move into the growing alternative housing market must also be considered. Eugene Esterkin added:“Provided the suppliers are reliable traders and installers then there is a great opportunity to use the new technology available.”
 
From a lenders perspective a loan will only be issued if there is enough security against the lend.
 
James Moore, BDM at Regentsmead Ltd, said:“The property being built must be suitable for mortgage lenders’ security. It must also conform for health & safety reasons, and for our warrantee providers like NHBC and have been approved by Building Control. We are the first link in this chain and are happy to lend so long as this type of construction ticks all the boxes for us to receive our money back, be it by sale or refinance especially in this economic climate.”
 
“We must remember not so long ago the Labour Government stated 25,000 new homes needed to be built every year for the next 20 years or so and that we are no where near achieving this figure in the current climate. So if this new housing is seen as suitable for all parties who are involved in the development to personal mortgage process and are in agreement to the security being 'of sound
investment' we would be pleased to be of assistance.”    
 
If mortgage providers are willing to accommodate the financial requirements involved in developing this alternative housing option, it’s possible that the UK property market stand-still could be relieved, paving the way for future stability.
 
By Florence Mosshart

Leave a comment