Buying Bubble

More than 10,000 reservations for new-build homes have been made through the Help to Buy programme in the previous four months, according to official numbers. However, questions remain over the program’s true usefulness.

While the government believes that the equity loan scheme is giving the confidence to house builders to deliver and build more new homes, new analysis by NatCen Social Research for Shelter – the housing charity – shows that the where banks are failing to help out struggling first time buyers, parents are paying out £2 billion every year to help their children get on the housing ladder.

Since 2009, more than a quarter of UK first-time buyers relied on support from their parents to acquire a deposit – with the average contribution from parents totalling £17,000 – more than half of the average deposit of £28,000.

“The fact that the Bank of Mum and Dad has to play such a central role in our housing market shows just how desperate the situation has become for a generation that’s priced out of a home of their own, says Campbell Robb, Shelter’s Chief Executive.

And although new housing supply is at its highest level since 2008 – with a total of 319,000 additional homes across England added to housing supply in the past two years – official figures show the number of new homes completed in the first quarter of the year was the lowest level since 1990 at just 24,330.

Earlier this week the Council of Mortgage Lenders (CML) stated that the number of first time buyers is at its highest level since 2007, with 68,200 acquiring their first house in the second quarter of 2013. As house prices have increased, many first-time buyers have had to borrow more, as the average loan size went up from £112,500 in May to £117,000 in June, according to the most recent data.

Although housing charities and analysts claim that the government’s plans encourage people to overextend themselves, Communities Secretary Eric Pickles has rebuffed the concern, asserting that the coalition’s package of measures to boost housing was working, with “house building and housing supply on the up.

“The tough decisions we’ve taken to tackle the deficit are now delivering a sustainable increase in housing and providing real help to hard-working people,” Pickles says.
Adding: “it’s clear that the Help to Buy: Equity Loan scheme is working well and Britain is building again.”

Even the industry has responded to the accusations, with many homebuilders hailing the programme for addressing mortgage financing, especially since this greater access to funding allows many homebuilders to raise their output levels in order to meet rising demand..

According to Barratt’s CEO, Mark Clare, “interest has been particularly encouraging from customers previously locked out of the market by high deposit requirements.”

Heat Pumps

“Our production will rise to meet higher levels of demand and it’s likely that our completions this year will be up 20 percent on 2 years ago,” adds Clare

In spite of this, a representative from Nationwide said that “building activity is still subdued – in Q1 13 housing completions in England were down 8 percent compared to the same period of 2012.”

And Kate Faulkner, property analyst and commentator believes that we still have an extensive way to go before transactions reach pre-credit crunch levels.

According to Faulkner, “currently, the number of homes sold is 40% lower than the long term average.”

“Housing associations, developers and institutions now need to double the production of new homes, while sellers need to be sure they can afford to make the next jump ‘up’ the ladder while it’s still cost effective to trade up,” she says.

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Last Updated on December 29, 2021


Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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