Has Help to Buy had its day?
The government is considering whether to extend or end its Help to Buy scheme. This initiative was supposed to help first time buyers get on to the housing ladder by providing tax payer funded deposits that would eventually be paid back at a low rate of interest.
Like most government interventions in the housing market, Help to Buy meant well but was always flawed for a number of reasons.
Help to Buy merely serves to increase demand and this in turn increases property prices. If we are to help young people get on or move up the housing ladder we need to moderate house price inflation, not stoke it. Help to buy has clearly helped to increased house prices.
In practice, Help to Buy has also enabled some rather wealthy people, who never really needed assistance from the state in the first place, buy very expensive houses in London which can’t really be described as starter homes. There are of course thousands of deserving buyers who were clearly in need of assistance who have also benefitted from the scheme.
Agents like me were always rather mystified why the scheme was targeted solely on new homes. Why did buyers have to buy a new home in order to get assistance from the tax payer? The answer to this question lies in the fact that house builders form an incredibly powerful business lobby in the UK with many directors of corporate house builders also sitting on the benches in the House of Commons and the House of Lords. As a consequence by far the biggest benefactors of Help to Buy have been the multi-millionaire chief executives of our nation’s biggest house builders.
UK governments have a very poor record of success when it comes to disrupting the UK housing market. History shows us that whenever governments intervene in this particular free market there are always unintended consequences. It would be best if politicians stayed well away from the property market but if they are going to intervene then in future measures should be properly targeted and thought through, preferably with proper consultation with professional bodies such as the Royal Institution of Chartered Surveyors and the National Association of Estate Agents.
I for one hope that Help to Buy bites the dust sooner rather than later.