Are help-to-buy schemes harming the property market?
With the government implementing a number of proposals over recent years to incentivise property sales for first-time buyers, a top economist is alleging that these schemes are doing more harm than good.
Over the last few years the government has introduced a range of policies, with the aim of helping those experiencing financial hardship to make the move from rented accommodation to owning their own home.
However, Dame Kate Barker, former policymaker at the Bank of England, believes that these schemes have had a more detrimental effect on the housing industry than if the government had simply let the sector progress under its own inertia.
From a macro perspective, it would easy to write the Dame’s opinion off as conjecture with little supporting evidence – but beneath the surface there appears to be much truth in the statement made to the Treasury Select Committee last week.
A clear example that illustrates her viewpoint would be the stamp duty rise in April, the original aim of which was to prevent landlords from buying up affordable housing, opening up the market for those on lower incomes. Unfortunately it soon became clear to property selling experts that landlords were able to continue purchasing these homes simply by passing on the extra costs to tenants.
“The problem with demand-side measures is that in the end they are going to be self-defeating,” said Dame Barker, “because if you price somebody in, you may price somebody else out, and you may just push the whole level of house prices up altogether.”
Even schemes such as the help-to-buy ISAs that were introduced were of little help to prospective first-time buyers, as the extra financial supplements would not be released until after a property purchase had been completed – effectively undermining the point of the entire proposal.
These views have been echoed by Mark Carney, the Governor for the Bank of England, who has admitted that most new loans in the last 12 months have gone to landlords or investors, as opposed to those looking to live in the purchased property themselves.
A long-time advocate for increasing spending on new affordable homes, Dame Barker has admitted that she sees no way for the government to follow up on their promise to build 400,000 new homes per year, and that years of stagnation within the industry could lie ahead unless parliament acts.
For now, the path to full recovery of the housing industry is unclear, a major issue for those looking to sell a house fast. With falling asking prices in the capital, many homeowners are now looking towards house buying companies who will buy any house for cash, regardless of condition or location, while others are hoping that 2017 will offer a turnaround for those who choose to use the traditional route of estate agencies.