One in five first time buyers say that government schemes like Help to Buy will help them get onto the property ladder, says the BSA’s quarterly Property Tracker report but many believe they are facing rising prices.
Across the whole of the UK 50% of respondents said that house prices will rise in the year ahead. It means that for the first time in the last three years, the majority of consumers expect house prices to rise in the next year.
Overall just 9% expect prices to fall over the next 12 months. The most optimistic are in Greater London where 59% think prices will rise and the most pessimistic are in the north east where just 38% think prices will rise.
Some 18% of all respondents said house prices will rise by 5% or more in the year ahead and only 3% of all respondents said house process will fall by 5% or more in 2013. Historically, future prices expectations have been an indicator of consumer confidence, and in a market where most purchases are discretionary, is a guide to future activity.
Results from the survey also show that recognition of the government schemes is reasonably high but that not all those looking to buy a home thought that it was the most helpful approach.
And rising prices are a double edged sword for first time buyers who continue to say that raising a deposit remains the single largest barrier to home ownership. Some 54% of those wishing to buy said it is their main deterrent.
Through schemes such as the Help to Buy mortgage guarantee, the government aims to help potential home buyers, particularly those with smaller deposits and the scheme is due to be launched in January. But even before its launch there are already 60 mortgage products across the whole market available to those with a deposit of 5% or less.
Some 29% of those wishing to buy said that the most important thing the government can do to help them is to support lenders so that smaller deposits are needed and 22% of those wishing to buy said that the government schemes will help them.
Also 25% of buyers with a deposit of 20% or less say they will be helped by government schemes, 8% wishing to buy said the schemes will be of use even though they could buy without them and 13% of those wishing to buy said they were not aware of the government schemes.
But the report highlights that one serious risk factor of the government’s strategy is the potential for the inadvertent creation of a future house price bubble.
It is critical that the Help to Buy mortgage guarantee scheme, which is yet to be defined, is designed and managed effectively with a clear exit strategy right from the start if the risk from state and ultimately tax payer intervention is to be avoided, the report suggests.
‘We are pleased that the government shares our commitment to get the housing market moving, but it is vital that there is a clearly defined exit strategy right from the start for the Help to Buy mortgage guarantee initiative,’ said Paul Broadhead, head of mortgage policy at the BSA.
‘It cannot become a permanent feature of the market beyond the time when the country is in economic recovery mode. Care is needed to prevent the actions taken today inadvertently causing a distorted housing market in three years time, a market where state intervention has artificially hiked prices,’ he explained.
‘There are encouraging noises from builders for the Help to Buy equity loan scheme. If this and other schemes do encourage builders to build and thus increasing supply and improving consumer confidence, it will be a success. If the government were to add some form of savings tax moratorium that would assist consumers by shortening the time they need to raise a deposit,’ he pointed out.
‘It is encouraging that one in five people with a smaller deposit say they can use government schemes to their advantage. But January 2014 is still a way off and the fact is that, while the number of products may fluctuate, mortgages which demand a 5% to10% deposit are already available to the 44% of prospective first time buyers who say they have a deposit of this size. For those keen to buy, now may well be the time to start,’ he added.