Help to Buy: A buying agent’s view

The government should be addressing why housing is so expensive in the first place, rather than finding a way to fund it, says Camilla Dell

There has been a huge amount of press commentary and opinion on the government’s Help to Buy scheme and the shock decision to bring phase two of the initiative forward to October.

Under the newly-launched second part of Help to Buy, people buying a property worth less than £600,000 can get a loan of up to 95% of the property price with 15% of the borrowing guaranteed by the government.

Obviously, the Help to Buy scheme is good news for first time buyers who, for many years, have been unable to get onto the property ladder as they could not afford to put down the 20% deposit needed in order to obtain a mortgage, and have therefore been forced to rent. However, the consequences of the government’s intervention into the market in this way may not be for the better.

 We expect to see more sealed bids and properties being sold long before being marketed in the lower prices ranges

Undoubtedly, the market sub £600,000 is likely to rise, as there will now be more buyers in this part of the market, and things could get quite competitive, particularly as the second phase isn’t limited to just new build. We expect to see more sealed bids and properties being sold long before being marketed in the lower prices ranges as a result.

The knock on effect is also likely to cause changes in the lower end of the rental market. Help to Buy will potentially take hundreds of tenants out of the market and could cause rents for properties valued up to £600,000 to fall. In central London, this is likely to be seen on one bed and studio flats in zones 2 and 3.

Yields are already quite constrained due to high capital values in the most expensive parts of London, so the attractiveness of London property as a pure rental investment may be diminished. However, most investors do tend to buy more for the longer term capital appreciation aspect, which could be accelerated in the sub £600,000 part of the market.

The problem with Help to Buy is that it’s a bit like credit cards

Whether Help to Buy will be for the best remains to be seen – overall, our view at Black Brick is that we are not sure it will be. The problem with Help to Buy is that it’s a bit like credit cards – people take on debt they can’t afford, which is dangerous. Why should someone with only a 5% deposit be entitled to government Help to Buy a property? And at a time when the government is desperately trying to pay off our huge debts, can they really afford to lend £12bn to first time buyers?

In our opinion, the government should really be addressing why housing is so expensive in the first place, rather than finding a way to fund it.

David Cameron has stated that he doesn’t believe it’s a housing problem, and that the problem is with banking. However, the fact remains that there is a real imbalance between supply and demand in this country, and we are simply not building enough homes.

We need to build more homes so that supply eventually meets with demand, and that’s where government’s focus should lie.

 
See what the BBC’s go-to housing expert Henry Pryor makes of it all here
 
And here’s a handy summary sheet (there’s even a diagram)
 
Camilla Dell is Managing Partner of Black Brick Property Solutions LLP
black-brick.com/+44 (0) 20 3393 6091
 
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