While successive Governments have dabbled over the years with initiatives to help people buy their first homes, Help to Buy, has had the biggest impact.
It was and still is a controversial scheme with many commentators at the time of its introduction saying it would lead to rapid price rises and create the next property bubble. The policy is now just over a year old so it’s a time to stand back and consider what it has achieved and where it’s going.
To mark the policy’s first anniversary, the Treasury recently published some stats on how it’s doing. So far almost 50,000 people have made use of the scheme, 82% being first-time buyers and 94% of purchases being outside London.
While some in the property sector have raised the idea that Help to Buy has distorted the market, the Bank of England’s new Financial Policy Committee seems to have put these fears to bed. It found that the scheme does not pose a material risk to financial stability and importantly “is not contributing materially to house price growth.” I welcome this regular oversight of the policy it seems a sensible and flexible response in what is a fluid and dynamic market.
Yes we’ve had 12 months of rapidly rising prices – in some parts of the country, but it’s vital that we don’t suffocate this nascent growth. Those of us outside of London haven’t noticed the exponential growth in prices and we shouldn’t allow what is a very special market to dictate to the rest of the country.
Indeed property prices in London seem to be stabilizing and some say may even drop in the New Year. Add in the new mortgage rules, which should also help to keep a check on prices and importantly ensure affordability for the longer term, and Help to Buy doesn’t seem to be the threat some think it is.
Let’s face it we’ve got a huge problem in people getting on the housing ladder, and don’t get me wrong building more homes is also part of the answer. But new homes aren’t built overnight and our first-time buyers are so crucial to the health of the market.
In healthy times first-timers can make up as much as 25% of the market, but that’s been slipping. Schemes like Help to Buy can be helpful in getting them on the ladder without it seems to have a distorting effect on the market as a whole.