Help to Buy is aimed at first time buyers who can’t afford a deposit who will be able to buy through a shared equity scheme and a government guarantee of up to 15% of a loan aimed at those seeking to move up the housing ladder.
It is estimated that 190,000 home buyers will be helped by the new scheme which will be introduced next year and only apply to new homes.
Dawn Carritt, director of national estate agents Jackson-Stops & Staff, backed the announcement for mortgage guarantees. ‘The announcement to continue with the guaranteed mortgage scheme will help support not only first time buyers and those looking to obtain a mortgage with limited funds for a deposit, it will help support the housing market, enabling not just new owners but existing owners and go towards freeing up the market and support the signs of recovery in the housing market which are just starting to emerge in some areas of the country,’ he said.
According to Jonathan Moore, managing director of EasyRoommate, the Help to Buy scheme will go some way towards releasing some would be buyers from the rental sector but the policy in isolation isn’t enough to solve the housing problem.
‘There is still a huge supply and demand imbalance in the rental market and this needs to be addressed. Boosting house building is one part of the answer but the Chancellor has missed a golden opportunity to unlock accommodation sat idle across the country,’ he said.
‘There are approximately 25 million empty bedrooms in the UK. If even a fraction of these were opened up to paying tenants it would release some of the pressure building up in the rental sector. The rent a room scheme allows homeowners to earn £4,250 per year tax free from letting out accommodation in their home. But this allowance hasn’t been increased for years,’ he explained.
‘Extending how much home owners can earn on rent before being taxed will encourage thousands more landlords into the market, and ease the supply shortage renters are currently suffering. Unfortunately, George Osborne has ignored this opportunity and the property market as a whole will suffer for it,’ he added.
Kevin Hollinrake, managing director of Hunters Property Group, described Help to Buy as a positive move that will undoubtedly generate activity in the housing market. ‘However, our concern is that this measure only affects the new build market. The current take up of the First Buy scheme means it only helps 1% of transactions in the UK,’ he explained.
‘First time buyers are struggling to get on the ladder in the resale market too, with many being out bid and marginalised by buy to let investors, and we would have liked to have seen the Chancellor help first time buyers right across the market,’ he added.
He pointed out that the plan to extend the scheme to second steppers is a positive move. ‘It will help get the rest of the market moving and with the new mortgage guarantee scheme looking like it will be available across the new and resale markets – the need for more new homes to meet demand will give the construction industry, which was down seven per cent last year, a much needed boost,’ said Hollinrake.
‘The scrapping of commercial property rates relief has caused huge problems and been a deterrent for speculative development from builders. It would have been good to see the Chancellor support a change to law that makes it less damaging to the efforts of speculative buyers and developers who want change it into residential, and the existing businesses of course,’ he added.
Osborne also signalled that the current Funding for Lending scheme could be extended. ‘We are now actively considering with the Bank of England whether there are potential extensions to the successful Funding for Lending Scheme that will boost lending still further,’ he said.
But some in the industry doubt this will help. ‘Funding for Lending isn’t really sustaining first time buyer activity, and has been poorly targeted. Lower monthly payments for the better off , that is those with the most equity, will do little to lift a sluggish housing market,’ said Mark Blackwell, managing director of xit2, property data specialists.
The industry also feels that planning is not being properly addressed.
‘The Chancellor’s announcement to get planning processes moving more quickly is welcome news but what the country really needs is an entire reform of its planning system, if we are to deliver the million new homes needed by 2015,’ said Ben Babington, director of residential development at Jackson-Stops & Staff.
‘More sites need to be released for redevelopment and it is only the local planning authority’s ability and willingness to release this supply that can change this. Without a clear set of guidelines to reduce the number of appeals that have to be made, all it does is clog up the development pipeline of suitable land,’ he explained.
‘On the funding side, the government really has to do whatever they can to encourage the traditional bank to start lending to experienced developers again. We have so many clients that have been successful developers for over 25 years, yet the traditional lending routes are largely unavailable to them. The traditional high street lender has to be encouraged to lend and support these experienced firms with a good track record,’ he pointed out.
‘The First Buy scheme has proven to be incredibly successful with a number of our developers, so it is great to see that this has been extended with the help to buy scheme. Not only is it a great way of getting those at the bottom of the chain on the ladder, but it will continue to have a positive affect on getting the rest of the market moving,’ he added.
