Expert says the future of housing supply currently hangs by a thread
The government’s failure to design and implement a fit-for-purpose alternative to the Help to Buy scheme is a fatal blow to the nation’s housing delivery efforts.
That’s the view of David Alcock (pictured), managing director at Blend, who said SME housebuilders have been left out in the cold and competing at a disadvantage with large national developers.
The government’s Help to Buy scheme, introduced in 2013, offered a solution for many first-time buyers who would have initially found house prices unaffordable. It has also been a key pillar of the UK mortgage industry over the past decade, and Alcock said has accounted for between 40% and 50% of site sales on many new developments in the UK.
However, Alcock said with the scheme having now ended, and with no clear successor, the housing market has been left in disarray, while the future of housing supply, already under significant pressure from existing challenges, hangs by a thread.
National housebuilders launching their own schemes
Over the past decade, Alcock said Help to Buy has been a key element of getting people on the property ladder.
“At the same time, housebuilders up and down the country had an incentive to build because they knew that the homes they were developing were accessible to first-time buyers through Help to Buy,” he said.
However, now, Alcock said that dual element of support to first-time buyers and incentives to build has been removed. Its elimination, he believes, has created an opportunity for many national homebuilders to step in with their own new financing schemes to support first-time buyers and help them step on to the property ladder.
“These include Deposit Unlock schemes that allow both first-time buyers and existing homeowners to purchase a new-build home with just a 5% deposit, to Deposit Boost schemes that allow prospective homebuyers who have a 10% deposit to boost it by 5%, and access more competitive 85% loan-to-value (LTV) mortgages,” Alcock added.
Alcock said the key issue with these freelance solutions, while not on the same scale as Help to Buy, is that they are out of reach for small and medium developers who lack the financial muscle of the large national developers.
“In fact, those SMEs were the homebuilders who most profited from Help To Buy; according to the Home Builders Federation - the ‘vast majority’ of developers registered with Help To Buy were SMEs,” Alcock said.
In other words, he suggested, these alternative schemes are forcing SME housebuilders to compete at a disadvantage with large national developers who have the ability to speed up or slow down construction starts accordingly.
“Now, do not get me wrong, I do believe there is distinct merit to initiatives such as Deposit Unlock and Deposit Boost,” he said. In a similar manner to Help to Buy, Alcock said these schemes support borrowers with small deposits to secure the high LTV products they need to make a first step on to the housing ladder. Despite this, Alcock believes that the property development industry needs a concerted and coordinated effort to design and implement a fit-for-purpose alternative to Help to Buy that does not close off the market to SMEs.
Housing delivery will ‘drop’ without Help to Buy
At a time when housing delivery is down by 2.6% across the UK when compared to the pre-pandemic market, the end of Help to Buy, and the fact that it seems unlikely that any one solution will fill the gap immediately, leads Alcock to believe there is a significant threat to the already limited supply of new properties on the market.
He believes the resulting impact will be that housing delivery continues its downward trajectory over the reminder of the year.
“Help to Buy is not a silver bullet to the home affordability crisis that is gripping the UK, but it might be an appropriate solution for some borrowers who previously would have relied on the scheme,” Alcock said.
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