The government’s contentious Help to Buy scheme has fuelled a demand for new build homes - but has barely impacted on London’s housing market
New figures from the Treasury show that almost three-quarters of the homes 7,300 homes bought through the initiative were new-build - confirming that the flagship scheme aimed at easing the housing crisis has increased the supply of homes across the UK.
Stewart Baseley, executive chairman, Home Builders Federation said: ‘After a number of years when house building levels fell to a record low level, all indicators show supply is now increasing rapidly.
‘The help to buy equity loan scheme is supporting demand for new build homes - and if buyers can buy, builders can build,’ he added.
But BBC business editor Robert Peston, described help to buy as an ‘irrelevance’ in London where it was used to fund only 5 per cent of purchases. In the property hotspot of Brent only one house was purchased through the scheme and in Kensington and Chelsea two purchases were completed.
Despite the low impact in London, the government will also heart from the figures as they appear to allay fears the scheme would further inflate house prices creating a house price bubble. The average house price of homes funded by Help to Buy is £191,295, way below the national average price of £252,000. And almost half of all completions were on properties less than £125,000.
Gráinne Gilmore, head of UK residential research at Knight Frank, said: ‘Fears that it is stoking house prices have so far been misplaced.’
On top of the 7,300 homes bought through the first stage of the scheme which launched in January, a further 20,548 homes have been sold through the second phase equity loan scheme that was launched in April.
Completions using the Help to Buy mortgage guarantee scheme
|Region||Percentage of completions (%)|
|Yorkshire and Humber||9|
The Help to Buy equity loan enables people to buy a new-build home with just a five per cent deposit, while the government offers a loan of up to 20 per cent. While the mortgage guarantee scheme, which launched in October, offers mortgage lenders the option to purchase a guarantee on mortgages where a borrower has a deposit of between 5 and 20 per cent. At the moment any property worth less than £600,000 is eligible.
Prime minister David Cameron, said: ‘As Britons, home ownership is in our blood - it’s about aspiration, planning for the future and laying down roots.
‘But we inherited a situation where for many people, buying a home seemed all but impossible - people who worked hard, had good jobs and could afford the monthly mortgage payments, but didn’t have the large deposit needed up front. For those without rich parents, the dream of home ownership remained just that: a dream. That is why we brought in Help to Buy.
‘Today, Help to Buy has helped thousands of hardworking people to buy a new home and crucially it is helping to increase the number of new homes being built around the country.’
Carney suggested that the Bank of England had been asked to provide advice on changing the terms of the government’s Help to Buy scheme.
Help to Buy: key figures
- 27,861 households have signed up to the scheme
- 7,313 homes have been sold under the Help to Buy scheme
- 74 per cent of Help to Buy homes are new-build
- Private house building is up 34 per cent since the launch of Help to Buy
- 85 per cent of Help to Buy sales have been to first-time buyers
- The average house price of homes funded by Help to Buy is £191,295
- 94 per cent of completions under the scheme are outside London
Stewart Baseley, executive chairman, Home Builders Federation
‘After a number of years when house building levels fell to a record low level, all indicators show supply is now increasing rapidly.
‘The Help to Buy Equity Loan scheme is supporting demand for new build homes - and if buyers can buy, builders can build. Its extension provides certainty about longer–term demand that will allow the industry to plan ahead, rebuild capacity lost in the downturn and ultimately deliver sustainable increases in supply.
‘This is providing desperately needed homes and also creating tens of thousands of jobs on sites across the country and in the supply chain.’
Pete Redfern, CEO, Taylor Wimpey
‘Help to Buy Equity Loan has given more people the confidence and the ability to step onto or move up the housing ladder. It enables us to build more homes on the sites we have already got open, and has given us more confidence to invest in future sites and infrastructure which creates more jobs and economic activity locally.’
Gráinne Gilmore, head of UK residential research, Knight Frank
‘The take-up rate for the Help to Buy mortgage guarantee suggests that fears that it is stoking house prices have so far been misplaced. House prices have been underpinned by rising demand amid limited supply, and the Help to Buy mortgage guarantee is at this stage only a side-show to this fundamental problem.
‘The mortgage guarantee was designed to improve access to the mortgage market for those with smaller deposits, but by the time the scheme was introduced, the choice of high Loan-to-Value loans had already increased considerably, helped by the Government’s own Funding for Lending scheme.
‘The idea of the mortgage guarantee, that the Government would help potential buyers of existing as well as new-build homes, has probably had a bigger effect on the market than the actual scheme. The Knight Frank/Markit House Price Sentiment index shows a rise in price expectations following the Chancellor’s announcement of the scheme last March. It will be interesting to see how the take-up increases over the coming months, as the data suggests a steady increase in buyers being given a leg-up onto the housing ladder between October and March.
‘Reducing the upper limit of the scheme from £600,000 to say, £300,00 will have little material impact, as 93 per cent of the loans were for properties costing £250,000 or less.
‘Take-up of the Equity Loan scheme slowed in April, with around 1,100 additional borrowers using the loan, down from the 2,936 who signed up in March. Developers and housebuilders are positive about the impact of this scheme, and its extension to 2020, indicating that it is helping secure the development of larger schemes, which is needed to address the fundamental imbalance of supply and demand in the UK housing market.’
Marnix Elsenaar, head of planning, Addleshaw Goddard
‘Our modern culture of blame has driven critics towards both house builders and Help to Buy as culprits for unaffordable housing in recent months. Yet no politician will stand up and say, “We want house prices to fall,” since much of the nation’s wealth is tied up this way. This in itself is an endemic problem that cannot be solved with one or two market measures.
‘Principally, figures clearly show that Help to Buy has had little real effect driving the gains seen in the South on account of the high prices and high salaries needed to afford properties. It’s easy to blame the major house builders but the commercial realities are what they are: finance remains tight and the planning system retains a number of fundamental issues.
‘Schemes designed to finance small developers have had little impact and the State remains steadfastly against council house building, despite huge reserves of public land and record low rates. Some crucial questions need to be answered about making the planning system function better in the modern age but ultimately demand for housing isn’t going to decrease.
‘Today’s figures highlight just how much profit ministers could have made for the state if they’d built thousands of council homes and sold them on to institutions just as they do with railways and roads. Many now look to China and rightly ask why schemes like Battersea Power Station take 30 years to get going.’
Chris Williamson, chief economist, Markit
‘Since the Help to Buy scheme was announced, the construction PMI survey conducted by Markit on behalf of CIPS has shown the strongest period of continuous house building growth for 14 years.
‘Confidence about the year ahead in the construction industry as a whole surged higher last summer, attributed by many companies to the various policy initiatives that have been put in place, including Help to Buy, Funding for Lending and the Bank of England’s ‘forward guidance’. The latest survey data shows confidence remaining close to record highs in April, suggesting the sector will continue to boom as we move through the summer.’