As the Help to Buy mortgage scheme drives up demand, without a correlating increase in supply, property prices will continue to surge, keeping potential purchasers off the bottom rung of the ladder. Buy-to-let specialist Assetz is calling on the government to rethink the implementation of both the first and second phase of the Help to Buy scheme in January 2014 by excluding or reducing availability in London.
Data released on 13th August by the Office of National Statistics* showed that house prices remain stable across the UK but are rising at an above average rate in London (8.1% in just one year). When London is excluded from the equation, prices across the UK only went up by 1.5% annually. Recovery of the property market throughout the rest of the country has not been as strong as in London. For example, the North East and North West saw annual rises of 0.4% and 0.1% respectively.
Stuart Law, CEO of Assetz, commented:
“What commentators should be pointing toward is the easing off of support for London house prices by abandoning Help to Buy in London and the South East. The government also needs to ensure the acceleration of construction in these regions through encouraging more aggressive planning policy in the South at the expensive of NIMBYism, in order to provide a balance to increasing demand, and give more affordability.
“Extending Help to Buy to second homes in the form of a government guarantee as planned in January 2014 will accelerate home building further by freeing up house purchase chains but this again should be concentrated outside of London and the South East. This should provide a satisfactory outcome for most, except perhaps the NIMBYs, by improving supply where prices are under most pressure, pulling back Government mortgage support in those same regions to moderate demand and at the same time moving support now to the rest of the country. The government needs to start making tough decisions on the housing market in order to get construction creating GDP growth whilst avoiding a housing boom in some parts of the country.”
Overseas buyers and local demand from better off families earning above average wages in London have driven up prices there and Government support is no longer needed as builders know they can build and sell well. What is now needed is support to kickstart the rest of the country and get large scale housebuilding there too.
* ONS House Price Index June 2013 (released 13th August 2013).