It has been viewed as one of the most significant interventions in the UK housing market by a government in over 30 years, but since its inception in 2013 there has been continued controversy surrounding the Help-to-Buy scheme (HTB) which aims to help buyers onto the property ladder.
Whilst hundreds of thousands of household’s acquisitions have been supported by HTB equity loan scheme, it has been widely reported that the scheme has also resulted in a disproportionate increase in house prices which has in turn, further exacerbated the affordability factor. However, a closer look at regional statistics shows that the relationship between house prices and HTB is not so obvious. For example, London has evidenced a significant house price increase of 51% since April 2013 however only 13.4% of new build sales were supported by HTB equity loans. Conversely, Newcastle upon Tyne has recorded a price increase of 20.6% with a significant 50.6% new build sales supported by the HTB Scheme. This is similarly evidenced in Liverpool and Sheffield with 37.9% and 32.2% of purchases being supported by HTB respectively, but house price growth in these locations has been below the national average over the same period.
House price growth since HTB inception and % of new build sales purchased using HTB equity loan
Source: HM Land Registry, Ministry of Housing, Communities and Local Government.
In addition, affordability remains an issue in many locations even with the support of the scheme. HTB equity loan purchasers require a 5% deposit which, in London, equates to £27,000 £12,000 in Birmingham, £11,700 in Leeds, and £9,400 in Liverpool, based on average new build house prices recorded by HM Land Registry. With the Office for National Statistics reporting that UK median disposable household income is c.£27,300, it can still take residents many years to save up enough to qualify for the scheme.
Whilst it’s easy for critics to blame HTB for price rises, the last 5 years have a been an unprecedented political and economic roller coaster and there have been many other factors at play, including interest rates at historically low levels and a weakened currency, which has made UK real estate, including regional property, more attractive to overseas investors. Moreover, it is a well-known fact that the housing market remains inherently under-supplied in many parts of the country. Whilst it cannot be argued that house prices across the England haven’t increased significantly since 2013, it is difficult to assess the true impact of HTB where markets are so under-supplied.
Whilst HTB continues to cause controversy, it is my view that affordability measures such as HTB are required to ensure home ownership can be achieved by a greater proportion of the population. These measures however are not the only solution and the continued supply of accommodation in all regions is essential. New supply will not only deliver affordable accommodation but also assist in moderating the high rate of price growth that has been evidenced. Maslow Capital is focused on supporting house builders in affordable locations and recognises the HTB scheme as one part of a portfolio of measures to assist purchasers with owning their own home.
Sources: HM Land Registry data © Crown copyright and database right 2017. This data is licensed under the Open Government Licence v3.0. Ministry of Housing, Communities and Local Government.