Help-to-buy scheme helps first-time buyers

The UK government’s ‘Help-to-Buy’ scheme has been found to be highly successful with a bulk of he first-time buyers taking advantage of the initiative, a latest research report indicates.

According to a report prepared by Home Builders Federation (HBF), a representative body for home builders in England and Wales, an estimated 170,000 homes were purchased through the scheme between April 2013 and March 2018. Of these, more than 4 out of 5 (80 per cent) were boug

 

ht by first-time buyers, who used it to climb on to the housing ladder.

 

The report, released as Government considers the scheme’s future, shows how it has achieved all the targets specified at launch (to increase home ownership; increase housing supply; and generate economic activity).

For first-time buyers, general improvements in the availability of mortgage finance have aided the recovery in numbers. In 2017, first-time buyers accoun

ted for 47.5 per cent of all mortgages, the biggest percentage since 1995. The average between 2000 and 2012 was just 34.2 per cent. A large part of this growth has occurred since 2013 with Help-to-Buy likely being a major support.

The scheme’s impact is such that its completions now represent a large proportion of all first-time buyer transactions. In 2017, the 37,485 Help-to-Buy completions by households purchasing their first home accounted for more than 10 per cent of all loans to first-time buyers.

In total it is estimated it has enabled some 246,000 individuals get on to the housing ladder. Despite claims from critics, the scheme is helping those it was set out to. In 2017, the median household income for those using the scheme was £49,000.

The report also demolishes critics’ often made claim that the scheme has driven up new build house prices and demonstrates that the respective increase in price between new builds and second-hand homes is remarkably consistent. While new build prices have always traditionally been slightly higher than second-hand properties, that may not come with new appliances and may require remedial work, the rate of house price growth for new build properties continues to mirror price rises in the wider housing market.

Since the scheme launched, housing supply has increased by an unprecedented 74 per cent, the fastest increase on record, to supply levels last seen in the 1950s. Planning permissions, a strong indicator of future supply, are up 88 per cent over the same period.

Whilst transactions in the wider housing market remain subdued (down 21.4 per cent on 2006 levels) activity in the new build market continues to rise. New builds now account for almost 15 per cent of mortgaged housing market transactions compared to a long-term average of 8.2 per cent.

The value of the Government’s Help-to-Buy equity loan book has increased significantly – and is still rising. The report estimates that the £8.9bn the Government invested over the first five years of the scheme could now be worth £9.8bn, an uplift of 10.5 per cent or as much as £935 million.

As housing stakeholders look to tackle the acute housing crisis and deliver on the Prime Minister’s target to build 300,000 homes per year, the scheme has a key part to play going forward.

source : HBF