The Government’s flagship Help to Buy scheme has become too popular, leading to a danger that developers have inflated prices to such an extent that buyers could find themselves with negative equity in their property, it is claimed.
The research from OkayLah says that the average first time buyer house price is £236,000 but it is higher at £298,927, a difference of £62,927, for those buying through the Help to Buy schemes.
It looked at the number of Help to Buy completions each quarter since the second quarter of 2013 and the total sold value of those Help to Buy properties to ascertain the price of the average Help to Buy property in each quarter.
The researchers then compared this to the average first time buyer house price from the Land Registry to see how prices differed for those using the Help to Buy schemes.
In the second quarter of 2013 when Help to Buy was introduced, the average first time buyer house price was £197,000, with the price paid per a Help to Buy property was lower at £186,091, making them over £10,000 better off as a result of using the scheme.
But by the third quarter, this had fallen to just over £6,000 better off, with a complete turnaround coming by the final quarter of the year with the average Help to Buy house price exceeding that of the average first time buyer by £7,714.
‘It’s quite astonishing how out of shape the Help to Buy scheme now looks against the backdrop of the rest of first time buyer market across the nation. While it was implemented with the best intentions and initially did serve as intended, the consequences of further fuelling demand in an area of the housing market that was already in desperate need of additional stock is plain to see,’ said chief executive officer Paul Telford.
‘What’s perhaps more alarming is that as much as half of the £1 billion or so made by the nation’s biggest house builders has come from the Government subsidised scheme and essentially straight out of the pocket of taxpayers,’ he pointed out.
‘Not only has this pushed Help to Buy prices up massively, but it leaves those buying through the scheme on vary precarious ground. While we are unlikely to see a market crash despite the slowdown caused by Brexit uncertainty, a notable softening of property values would leave many in negative equity when considering their Help to Buy property within the wider landscape of the first time buyer market climate,’ he added.
