A helping hand?

It is better to give than to lend, and it costs about the same. 

What a surprise. The most expensive place in the country to buy a property is the also the place where the Government’s Help to Buy has helped the fewest people.

Research by the BBC found that, although one in three new build properties outside London were bought the scheme, just one in 10 London were.

The BBC analysed official figures from the Department for Communities and Local Government. It found:

Help to Buy was used to purchase 76,559 homes outside of London between April 2013 and April 2016..That’s nearly a third of all privately built new properties in that time.  Move into London, however, and that number falls to 4,483, or just 11% of the privately built homes built in London during that time.

Also not surprising, is that when the Government boosted the upper limit for new home-buyers in the capital from 20% to 40% of the property’s value in February last year, the numbers increased.

The BBC found that the £4.6 bn worth of equity loans went on 100,284 actual loans to purchase £17.7bn worth of properties. The average equity loan was £46,301 , the average purchase price was £229,608 and a whopping 81% of the loans were to first time buyers.

The original idea of Help to Buy initiative was to kick-start the bottom end of the market, giving those who couldn’t afford the deposits demanded both by the increasing house prices and the nervous lenders, the chance to buy somewhere. .When interest rates hit the floor and stayed there, we had the very odd situation of people who could afford the monthly mortgage payments with ease, being kept off the ladder because they couldn’t raise the deposit (and don’t forget, this was the time when lenders were running scared of any loan-to-value ratio greater than 80%).

Help to Buy did help people to buy. Lots of them. It helped the people it as intended to help and it probably also helped others who could easily have managed by themselves but who saw the benefit in getting government help.

Did it also perpetuate the rising cost of housing? Possibly, although the DCLG says there is no evidence of this. It certainly made buying houses easier for many people, opening up the market. Basic economics teaches us that if you make something easier to do, more people will do it. Unless Help to Buy also increased the number of properties for sale at the same time, I don’t see how it could avoid being partly responsible for house price rises.

I don’t know what I’s like I other parts of the country but in my neck of the woods houses are selling almost as soon as they appear on RightMove, at or as near as can be to the asking price.

What will happen once the Help to Buy well runs dry? Will we be left nursing another property hangover?