A new report released by the Home Builders Federation illustrates how successful the Government’s Help to Buy (HTB) equity loan scheme has been.
The report, released as Government considers the scheme’s future, shows how it has achieved all the targets specified at launch: to increase home ownership, increase housing supply, and generate economic activity).
Figures going in the right direction
It has been revealed that between April 2013 and March 2018, 170,000 homes were purchased through the scheme, with 80 per cent of these homes being purchased by first time buyers. But despite the original naysays from critics, the HTB scheme has enabled an estimated 246,000 individuals to get onto the housing ladder since its launch
Whilst transactions in the wider housing market remain subdued (down 21.4 per cent when compared to 2006), there is a continual rise of activity within the new build market. New builds now account for almost 15 per cent of mortgaged housing market transactions compared to a historic average of 8.2 per cent.
The report highlights that the median household income for those using the scheme in 2017 was £49,000. Taking this figure into account, and the fact that just 3.3 per cent of new lending in Q1 of 2018 was at 90 per cent or above, there is no evidence to suggest that the market could support high loan to value mortgages should the scheme be withdrawn.
The HTB scheme has also been successful for the Government from a financial perspective too. It is estimated that the £8.9bn the Government invested over the first five years of the scheme could now be worth £9.8bn, an uplift of 10.5 per cent or as much as £935m.
Stewart Baseley, executive chairman of the Home Builders Federation said: “It is quite clear that the Help to Buy scheme has been an unmitigated success and has delivered handsomely on all its objectives. It has enabled hundreds of thousands of people to realise their dream of owning a home, the vast majority of whom are first time buyers on average incomes.
“The Government should celebrate its success and use the hard evidence now available to rebut the claims of its critics. As we look to tackle our acute housing crisis and deliver on the Prime Minister’s target to build 300,000 homes per year the scheme has a key part to play.”
Mirrored growth rates
The report also demolishes critics’ often made claim that the scheme has driven up new build house prices and demonstrates that the respective increase in price between new builds and second-hand homes is remarkably consistent.
Although new build properties have traditionally been priced slightly higher than second hand properties, the rate of house price growth for new build properties continues to mirror price rises in the wider housing market.
Supporting the building industry
Homebuyers aren’t the only ones reaping the benefits of the HTB scheme – the building sector is too. It is estimated that thanks to the 48,000 homes sold through the scheme, 150,000 jobs could be sustained. Since the scheme launched housing supply has increased by an unprecedented 74 per cent, the fastest increase on record, to supply levels last seen in the 1950s. Planning permissions, a strong indicator of future supply, are up 88 per cent over the same period.
This additional house building activity is also estimated to provide or fund 20,000 affordable homes, as well as generate £1bn in tax receipts and contribute £73m towards education via Section 106 taxes - enough to provide up to 34,000 classroom spaces. HTB has become an accessible scheme for the industry, with 3,000 building companies varying in size now registered.
Stewart Baseley commented: “Housebuilders continue to invest in the land, materials and people needed to deliver furthers increases in supply confident in the demand Help to Buy is underpinning. Certainty moving forward is now required to enable the increases in housing supply, and the associated social and economic benefits, to continue.”
The Home Builders Federation (HBF) is the representative body of the home building industry in England and Wales: www.hbf.co.uk