How Should the Help to Buy Scheme be Applied? Rifle or Shotgun?

Press release: 21st October 2013

Home.co.uk questions whether the Help to Buy scheme in its current form will really assist people trying to get on the housing ladder

In property markets where prices are rising fast due to extremely restricted supply, will the government's Help to Buy scheme really assist people trying to get on the housing ladder? Or will it simply help push home prices out of reach?

The bipolar nature of the UK's property market raises questions over the national application of the scheme. For example, in London, average asking prices are in excess of £400k and 2.6 times the average price in the North East. Prices in London are soaring, yet they are stagnant in the North East. Shouldn't H2B be focussed on the markets that really need the help?

H2B is clearly justifiable in areas such as the North East that so obviously need the stimulus. However, huge local disparities mean there is a severe danger that the Help to Buy scheme will push high-performing markets such as London further into bubble territory. If relatively well-off first-time buyers in London suddenly have easier access to lending, the already overheating market will be faced with more demand, and prices will go stratospheric.

Asking Price Movements for Greater London and the North East

Some analysts have called for a downgrading of the value limit which, at first glance, is a logical step in their thinking. However, whilst this would stimulate the market as planned, it would ultimately serve to push up the lower end of the market in richer areas, much to the chagrin of first-time buyers.

Doug Shephard, director at Home.co.uk, commented:

"Looking at the current market dynamics, demand is already outpacing the overall supply of properties for sale and pushing prices upwards. The growth in cheaper borrowing is feeding this demand and the Help to Buy scheme is likely to worsen the growing supply-demand imbalance. Hence, if applied at a national level, we would question the scheme's ability to address the diverse needs of the UK's property market. However, if the scheme was applied selectively, it could have real merit and provide longer lasting benefits for the market as a whole. An initiative that was focussed purely on poorly performing areas (e.g. selected postal districts) where the property market remains stagnant (cf. selling times that are in excess of the national median) would avoid the risk of overstimulating local markets that have already fully recovered post-crisis. Our recently published Time-to-Sell Heat-map should be food for thought for Mark Carney and the new housing minister, Kris Hopkins MP."

Source: Home.co.uk Asking Price Index

Notes for Editors

Over the last 28 years, Home.co.uk has become established as a dynamic, innovative and ethical service. By providing the UK's most comprehensive Property Search and Estate Agents directory coupled with detailed House Price analysis, Home.co.uk delivers the real power of the Internet to inform and empower estate agents, homebuyers, renters, landlords and sellers in across the UK.