Could Help to Buy be hindering FTBs?
Findings from a new study have indicated that the Help to Buy scheme may have hindered some first-time buyers getting on to the housing ladder.
According to a study conducted by Alastair Stewart, the government scheme fails to provide all its supposed benefits, potentially causing more challenges for those looking to buy their first home.
The analyst from Stockdale securities highlighted the dependence of housebuilders upon the scheme, mentioning that over half of Persimmon sales take place under Help to Buy, with the proportion not much lower for companies such as Taylor Wimpey and Redrow.
Whilst the scheme is planned to be phased out, the recent reports of an early closure could negatively impact housebuilders Stewart states.
Although these suggestions were dismissed by the government, the analyst expresses the uncertainty surrounding the policy’s future. He stated: “Our analysis of data suggests political controversy ahead. Private completions have risen by a modest 7.7% compound annual growth rate (CAGR) since 2013, but the scheme now accounts for 33% of private deliveries. Help to Buy prices have delivered 10.6% CAGR since launch versus 7.0% for Land Registry average prices.
“Help to Buy prices paid by the main target group, first-time buyers (FTBs), have risen even faster than Help to Buy prices paid by non-FTBs.
“Additionally, Help to Buy prices are at a greater premium to underlying markets in the North and Midlands than in the South. An unintended political risk, in our view, is that FTBs, particularly in the North, face effective negative equity and potentially insurmountable hurdles against moving on.”
Stewart also highlights the location of the homes built under the scheme, stating that the focus has been on areas with reduced housing need i.e. the North and Midlands. He states that rather than meet the existing demand in areas where supply needs a boost, builders chose to use land already obtained following the property crash.
For buyers who may have hoped to benefit from the scheme, Stewart states the scheme may create its own problems. He states that it has “disproportionately inflated prices and delivered homes where they were less in demand – delivering a windfall to margins and cashflows”.
Whilst the scheme may have both helped and hindered access, it is up to the government to decide on its future.