More than 15,000 buyers have signed up to purchase properties using the Government's Help to Buy equity loan scheme. The scheme has given the housing market a kick-start and is encouraging hardworking people to buy a home in the UK.
Help to Buy is aimed at overcoming the deposit barrier and has currently only been available for new-build properties. The Government lend buyers with a 5% deposit up to 20% of the value of their new-build home priced below £600,000 for five years.
From January 2014, the scheme will be extended to buyers of all properties, not just new-builds. The scheme will work for properties of up to £600,000 giving purchasers with a 5% deposit the ability to buy, with the Government guaranteeing a further 15% of the loan as an insurance policy for the banks.
The second phase of Help to Buy coincides with the RIC Residential Marketing Survey which suggests we are experiencing a four year high in residential house prices. This resurgence of activity in the residential market is giving a much-needed boost to the UK economy and, in particular, the construction industry. House builders including Crest Nicholson, Berkeley Homes, Bellway and Persimmon have reported a marked increase in activity since the Help to Buy Scheme was launched in April 2013.
There are, however, still growing fears that Help to Buy will create a new housing bubble with a widening of the gap between house prices and wages. Last month it was said that house prices were rising across every region of the UK for the first time since the credit crunch.
Experts warn that the scheme may lead to artificial house price inflation which will push house prices further out of reach of first time buyers. Experts also warn that the Government needs to free up more planning restrictions in order to boost the much-needed supply of new housing which needs to be built to match the popularity of the Help to Buy scheme.
Whilst our clients may not be making direct use of the Help to Buy scheme, we will all be watching with interest to see what the effect really is on the UK housing market. Expect to see house prices soar, demand increase, deposits drop and construction of housing reaching an all-time high.
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