10:48 AM, 18th February 2011, About 10 years ago 1
Britain’s leading house builders are looking at changing their business models by moving in to buy to let as buyers struggle to raise mortgages for new homes.
Barratt Developments – the biggest firm with brands Barratt, David Wilson and Ward – is offering a limited sale and leaseback terms to buy to let investors.
The company is also looking at joint ventures on a much larger scale with property investors, starting with building 1,000 homes for rent in London.
Redrow is also switching from building homes for first time buyers to developing larger properties for families moving home.
Both builders are seeking to distance their businesses from reliance on first time buyers and blame ‘chronic’ mortgage availability for strangling the house building market.
Reporting a rebound in to £8.5 million profit after a loss of £8.7 million last year, Redrow founder Steve Morgan is looking at a fundamental shift in the housing market away from first time buyers to home movers.
“No one wants irresponsible lending of a few years ago,’ he said.
‘Nevertheless 90%-plus mortgages, which previous generations of first-time buyers were able to take for granted, are now prohibitive on the grounds of both availability and cost.
‘We remain concerned about the impact on the market as a whole of the historically low turnover in first-time buyer housing transactions. There are many more would-be middle market purchasers who are unable to proceed due to the lack of first-time buyers in the housing chain.’
Barratt are offering landlord’s a guaranteed 7.2% gross yield on selected properties on a sale and leaseback licence where the builder agrees to sell and then rents them back for an agreed term.
The builder is also looking at selling homes on a development to a joint venture private landlords or wholesaling homes to investors at the outset of a development.
Mark Clare, chief executive of Barratt, said: “A professional rented model is going to very soon gain some traction. We could have 1,000 homes a year in London that we could sell this way.
“Landlords could charge a premium for the stock if we get this right. It is a big opportunity for us to be able to say to customers that we have options for them.”
Berkeley Homes and the Homes and Communities Agency have already signed a contract that sees £45.6 million funding for 556 homes over the next two years in return for a 20% stake in the deal.
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