The Government’s Help to Buy scheme may be helping first-time buyers to get on the property ladder, but they are paying more for it due to the structure of the initiative, an agent claims.
The Help to Buy equity loan scheme, launched in 2013, provides a Government loan to a borrower of up to 20% of a new-build, 40% in London, worth up to £600,000, with the buyer stumping up 5%.
But independent estate agency James Pendleton warns that the £600,000 limit has led to high numbers of new-builds selling for just below the threshold with many wealthier buyers using the scheme to get higher price properties, rather than the first-time buyers it was meant to benefit.
Using Land Registry data, the firm studied 563 homes sold in hotspots of Battersea, Putney, Tooting, Balham, Wandsworth, Clapham and Brixton in the last year.
The figures showed that more than four times as many new-build homes were sold just below the threshold compared to just over it in the past year.
The analysis revealed that 380 properties across the £575,000 to £600,000 price bracket were sold last year, compared with just 183 properties sold in the £600,000 to £625,000 bracket.
Of the 563 homes in total, 184 were new-builds – making them eligible for Help To Buy – and were sold at just under the threshold for £575,000 to £600,000, while only 38 new-builds achieved between £600,000 and £625,000.
Lucy Pendleton, director of James Pendleton, has noticed two negative consequences of the scheme.
She said that those with smaller budgets are squeezed by those with bigger budgets keen to take advantage of the Help To Buy scheme, meaning first-time buyers can easily end up paying more for smaller properties that have been ‘priced up’ to meet the increased demand.
A secondary effect is that sellers of homes that are not new-builds and are not eligible for Help To Buy nevertheless come under pressure to reduce their prices to compete, further distorting the market.
She said: “Artificially high demand in this price zone just beneath £600,000 will be forcing many to pay over the odds.
“By introducing a Help to Buy threshold and axing Stamp Duty slab tax, the Government has simply replaced one disruptive line in the sand with another.
“These hurdles placed at arbitrary price levels have always had a distorting effect on the market and that’s what we are seeing now, smack bang in the middle of the cost of many one and two-bed flats for young professionals, which is a crucial price point for first-time buyers in these areas.
“This may cause problems when these new-builds are sold on, as they will no longer be available under Help To Buy and sellers won’t benefit from the extra demand the scheme generates.”
It is noticeable in London on new high rise developments which are reaching completion a two tier market has developed
Those vendors who have bought off plan looking to resell are precluded from selling to those seeking to take advantage of Help 2 Buy Only the developer can sell direct where a 10-15% differential has appeared for the same flats
All that means is the new buyers who are only putting in 5% hard cash deposits are immediately plunged into negative equity.A big price to pay to get a foot on the Housing Ladder
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Most of these Government schemes distort the market and are done for political gain – to make the party look good!
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Help to Buy was and always will be a scam at helping the large scale property developers who fund the political establishment achieve higher prices than they would normally be able without it. Anything that helps a buyer purchase a property at a price that otherwise is unaffordable is always going to have consequences….Together Mortgage etc. When these problems then become apparent government seeks to push the blame onto buy to let landlords, letting and estate agents etc.
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This and other consequences of Help to Buy is covered in my book The Real Estate Agency and the Great Conspiracy Theory in the chapter headed “Help to Buy – Who Has it Really Helped”
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Keep it up, Mr Smeaton…
…who knows – ONE OF THESE DAYS some div might buy the chuffin’ book!
The rest of us just write our thoughts here for all to read – free.
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Thanks PeeBee
i wrote the book as I believe corporate influences over mortgage broking, surveying, and estate agency have not been in the public interest and these aspects have been operated with only profit in mind. Similarly mortgage lending. Housing is a social issue. I have suggested ways forward and hope to influence public opinion. Whilst possibly a vain hope, that can only happen if people read it, so forgive me if I feel the need to bring attention to it.
Incidentally ,I did answer your reply , I think it was March 14th, though belatedly because did not see it until someone told me about it.
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