Given the criticisms the government’s Help to Buy scheme has received since the Budget announcement, Chancellor George Osborne could be forgiven for thinking that you’re damned if you do and damned if you don’t when it comes to trying to stimulate the housing market. He unveils a huge new scheme earmarking billions of pounds worth of support to help both first-time buyers and homeowners realise their property aspirations and all commentators seem to do is pick holes in the initiative.
From where I’m sitting there is plenty to be encouraged about and if lenders get behind Help to Buy there will be undoubtedly be greater take-up than with previous schemes. There have been accusations that the measures won’t actually address the issue of the supply shortage and increasing buyer numbers will simply drive up prices. Clearly that is a risk which needs to be monitored.
The first part of the scheme launched from April is aimed at stimulating the new homes market. House builders will be encouraged by the shared equity element of Help to Buy which is accessible to more buyers than before and relieves builders of the burden of tying up capital for long periods which could be deployed elsewhere.
These factors should help more new build sites get underway and increasing supply will assist price stability. It’s worth remembering that supply and demand is a two-way street. In recent times lack of buyer demand and mortgage availability has meant house builders not wanting to sit on housing stock they either can’t sell or an achieve appropriate price.
It’s also worth bearing in mind that it is still nine months before the scheme is to be fully implemented with a guarantee scheme aimed at the whole housing market not just new build properties, so the kinks evident in the initial draft should be largely ironed out by then. Osborne has already stated a willingness to listen and engage in further consultation with the mortgage and housing industries and there will undoubtedly be further work to do in persuading risk averse lenders to support the scheme. The government’s offer to indemnify this risk will allay fears to an extent, but this is unlikely to be an easy task and without broad based lender support the success of any initiative will be limited.
All in all it is encouraging that the government is being proactive and not just sitting on its hands for the long awaited economic recovery to drive lender and buyer confidence in kick-starting the property market, but clearly there are a few bridges to cross before we can judge whether the scheme has been a success.
Paul Nye is director, business partnerships at Stonebridge Group