Like a fair house built upon another man’s ground; so that I have lost my edifice by mistaking the place where I erected it
Hurrah for the Government. It’s not often this blog features those words and they are, naturally, slightly tongue in cheek. However, Help to Buy part 2 launches today and that is cause for some, if not celebration, then at least optimism.
We’ve seen already how Help to Buy part 1 has helped to boost the sales of new build homes and, by extension, building products as housebuilders bring new projects on stream to fill the gaps left by those sold.
So it stands to reason that hep to Buy part 2 will to something similar for what the Government is rather quaintly calling ‘second-hand homes’. In one way, this second d stage is likely to do far more good for the builders and plumbers merchant sector – and, indeed, the DIY sector – than part 1.
Building 101 teaches us that the repair maintenance and improvement market which is the core of most merchants’ business is driven largely by levels of property transactions. The repairs to the roof, the new patio, the kitchen, the paint and wallpaper, the boiler: sales of all these are generated by newly moved-in people realising that they really can’t live with their predecessors’ taste in carpets, kitchens, bathroom suites any longer.
So if the thing that has stopped these people from indulging in their RMI passions for the last few years has been their inability to raise sufficient deposit to move on up the housing chain, then help to Buy is going to do what it should.
Yes, there is quite a bit of hoo-hah over whether it will cause house prices to rise and then, presumably fall, once the scheme finishes (i.e. When the money runs out).
I can’t quite work out whether it will cause rise or whether they’ll just rise anyway as the market becomes more healthy/demand exceeds supply.
What causes house prices to rise in the first place is vendors (and agents) deciding how much they want to get for their property. What causes them to stay high is people agreeing to purchase at those prices and that tends to be when they decide they want the property more than the next person.
It’s basic economics, the law of supply and demand. If more people want a thing than there are things available, then the price of that thing will rise.
I can’t remember how long Help to Buy is supposed to run for but we all know it’s not an infinite pot of money. The industry needs to keep on at the Government to work out what is likely to happen when Help to Buy is over. As the CPA’s Dr Diana Montgomery said at the BMF Members’ Day last month – “what is the exit strategy for Help to Buy?”
The last thing we need is for the scheme to come to an end with a flurry of people all falling over themselves to get house purchases agreed before the deadline expires. That’s what happened in 1988 when double mortgage interest tax relief was abolished and most of us remember what happened to the housing market after that.
Patrick Collinson in yesterday’s Guardian (click here as it’s worth reading)
points out that the real issue is not, anymore, the availability of lending, but the current levels of house prices anyway and the affordability issues that these throw up. Someone earning £30,000 in an area where the average first property is £200,000 is going to struggle, with or without the 95% mortgage, whoever is guaranteeing it.
Still, if, in the short term, Help to Buy means that more houses are built, bought and refurbished and that, as a result, builders merchants see some more business then it’ll be a good thing.