The past few weeks have seen a steady stream of headlines with warnings of a housing bubble and much discussion around the impact of Help to Buy’s second phase on the UK property market. Statistics were released recently reporting price increases of more than 17 per cent, with the Governor of the Bank of England announcing that the UK housing market may be the single biggest threat to economic recovery. Everybody from Lloyds Banking Group and Vince Cable to Nationwide have since weighed in on the topic, with opinion still largely divided.
The most recent criticism has come from the International Monetary Fund (IMF), which has long voiced concerns about the lasting viability of the scheme, anxious that it will result in house price increases and undermine its initial objective – to make housing accessible. The IMF‘s managing director Christine Lagarde spoke out again last week, when she urged the Government to reconsider the second phase of Help to Buy and to limit high loan-to-income mortgages for fear of a collapse in the market and a potential housing bubble.
Remove London from the equation
Much of the debate around the longevity of the scheme has been fuelled by media hype around the price of housing in London, with many voicing concerns for younger generations hoping to get on the property ladder. And yet figures recently released from the Treasury highlight that any suggestion of a property bubble in London being caused by Help to Buy simply isn’t true, with a mere 5 per cent of mortgage sales agreed under the scheme so far having taken place in the capital.
Commentators within the industry are now largely agreed that Help to Buy is having a positive effect on the economy; providing jobs, helping to speed up the building of new homes and perhaps most importantly, addressing the housing shortage.
While it’s important that London remains part of the conversation, it’s key that any analysis takes into account the UK as a whole. The media has largely honed in on horror stories from aspiring homeowners having to sleep on a friend’s sofa or in space-restricted box-rooms, suggesting that it will be many years before these prospective owners even get their foot in the door. Despite national reporting, this is only really reflective of London. Beyond the capital, the housing market is regaining confidence with 80 per cent of mortgages under the scheme purchased by first-time buyers, most of which are used to buy a property under £125,000. In this respect, Help to Buy has – to date – fulfilled exactly what is set out to accomplish and continues to help benefit thousands of people across the whole country.
Get Britain building
Since the scheme’s launch, the construction industry has been regaining confidence with Help to Buy playing a major role in fuelling confidence. Initiatives such as Construction 2025 are successfully working in harmony with the scheme to ensure that the industry and the Government works in partnership to position Britain as global leaders in the construction industry. According to the Federation of Master Builders (FMB), demand for housing will outstrip supply by more than 500,000 homes by 2015, which again, is positive news for the industry as it looks to get on site and start digging.
Housing shortage
A recent survey from Savills predicted that the scarcity of available housing in the south of England alone will reach 160,000 by 2019 unless local authorities do more to help facilitate building projects. Public rage at the lack of housing has led to some pointing the finger at developers, faulted for allegedly ‘sitting’ on land while its value continues to rise. And yet recent figures from the Home Builder’s Federation (HBF) highlights that this simply isn’t true, with only four per cent of land held by housebuilders lying dormant. In reality, much of the problem lies with red tape around planning permissions, which can prevent developers from getting on-site for up to 12 months.
There are huge opportunities for both consumers and developers, both of which Help to Buy is already benefiting. If the construction industry is to prosper, it’s crucial that it ignores those that seek to jeopardise the scheme and remain focused on the task in hand.
About the author
Tracy Hall, partner at commercial law firm Watson Burton LLP
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