There has been a particular bias towards lower income renters in London and the South East, where 40% of renters using the scheme to buy their first home earn under £30,000. Indeed less than 20% of Help to Buy backed purchases were in London and South East, proving that Help to Buy is not fuelling a property bubble as some have suggested.
Help to Buy purchasers who previously lived with their family, account for 30% of those using the scheme, a significant proportion of all users of the Help to Buy scheme. They are typically first time buyers still living at home, unable to access the private rented sector due to the cost of rent, or are unwilling to do so due to a desire to save for a deposit more quickly. As a consequence, these people tend to be younger than average, earning 16% less than those living in the private rented sector. Half of these purchasers are single person households and this means that housing costs take up a larger proportion of their income. In the majority of cases, these are new households who were saving for a deposit while paying reduced or no rent.
Help to Buy has provided a lifeline to many homeowners in parts of Northern England where falling house prices have eroded the equity they hold. For existing homeowners in parts of Northern England who bought in 2006 or 2007, Help to Buy has provided a lifeline after falling house prices have reduced the equity of many households, preventing them moving. In the North East, almost 30% of homes purchased through the scheme have been bought by existing home owners.
Commenting, Nigel Stockton, Group Financial Services Director said:
“The Help to Buy scheme is enabling a growing number of households to achieve their aspiration of homeownership at a time when the proportion of high loan to value values is historically low. Given that the scheme is funded by the Government, it is important that those using it would otherwise find it difficult to buy without assistance. This has almost exclusively been the case with the majority of purchasers coming from the private rented sector or the parental home.
“As homeownership rates decline, particularly amongst younger age groups, Help to Buy increasingly represents the way many new households are able to get onto the housing ladder. Help to Buy remains an extremely popular policy among aspiring homeowners. While the use of the scheme by existing homeowners is perhaps less politically acceptable, they tend to be households with little or no existing equity in parts of the country where house prices remain below the levels at which they bought.”
While the number of properties for sale across much of London and the South East remains down 10% year-on-year, there are increasing signs that this is changing. Recent rises in house prices are driving a raft of new sellers to the market. Countrywide plc carried out 24% more market appraisals in June 2014 compared to June 2013. In London, where a shortage of stock has been felt most strongly, the number of appraisals rose 14%. Market appraisals are a key indicator of future levels of stock and a rise in numbers is likely to result in more stock coming on to the market in the coming months.
Commenting, Grenville Turner said:
“In a sign that the supply / demand imbalance is beginning to even out, the large increases in house prices in London and the South East are beginning to attract new sellers to the market. With more people thinking about selling, the number of properties available looks set to increase over the coming months. This will have a significant impact in parts of London where a fall in properties for sale over the past nine months has put considerable upward pressure on house prices. If this rise in appraisals translates into a larger number of available properties coming on to the market, increased choice for buyers will serve to alleviate some of the upward pressure on house prices.”
