The landmark property purchase scheme for first-time buyers is coming to an end but the Government should think again, says Andrew White, Head of Residential UK and International (Asia) at Colliers.
Imagine a scheme which supported house building, supported first-time buyers, chimed with the national obsession of home ownership, and made the Government money for nothing.
It sounds fanciful, doesn’t it, until you realise this is exactly what the soon-to-be halted Help To Buy scheme offered the nation.
After 6pm on Hallowe’en, this quite radical policy will become a historical entry in the book of ‘Inexplicably Jettisoned Good Ideas’, and possibly an easily avoidable political own-goal for the newly installed Liz Truss government.
Since its inception in April 2013 to the end of March this year, Help To Buy has supported 361,075 property purchases.
The value of the equity loans made to support these was £22.5 billion, with the value of the properties sold under the scheme just surpassing £100 billion.
So why is it being canned?
Detractors of the scheme claim all the policy does is drive house prices higher, but there’s a strong argument to the contrary.
Help To Buy incentivised housebuilders to construct the types of properties that the market most needs – three or four-bed family housing – following a previous boom in one and two bed flats to prop up the formerly lucrative Buy to Let market.
Simple economics dictates that an increase in supply should help cool the record-breaking average property price rises being registered in the UK right now. It’s true that Help To Buy can’t solve the UK’s chronic housing supply issue (a topic for, but it’s at least a proactive step in the right direction.
Those inside Government might point to the fact that the Lifetime ISA will remain in place, a tax-free savings product that provides a 25% bonus up to a maximum of £1,000 per year.
But with the cost-of-living crisis well and truly biting, this product is arguably not as helpful as its Help To Buy: Equity Loan sibling.
Worse still, the move to consign Help To Buy to the past means that the Government will be sacrificing a passive income stream at a time when Treasury coffers are being stretched by household energy support schemes.
A back of the proverbial mortgage deed calculation would suggest that if the Government had put £5 billion into Help To Buy this year, it would have made a 10% return having borrowed the money at around 0.75%.
I would urge the Government to think again about letting Help To Buy lapse, especially because of this prediction: If the Government abandons Help To Buy, the private sector will in all likelihood fill the void. But the Government would effectively be locking itself out of a politically popular and actually profitable initiative that should have lasted more than its nearly 10-year lifespan.
This article originally appeared in React News on Tuesday 20 September.
About the author
Andrew White heads up the UK Residential & International Properties (Asia) Department at Colliers and is a specialist advisor in residential and mixed use developments. He has advised government bodies, as well as family businesses, funds, charities, developers and companies on their strategy for disposal of their land holdings and property assets. His team handles transactions in Land, New Homes, Build to Rent and UK properties internationally.
To contact Andrew, email Andrew.White@colliers.com