Help to Buy supported an average of 1,000 sales of new-build homes a week last year, mostly to first-time buyers – while helping developer Persimmon achieve record profits.
But the NAEA said that all Help to Buy does is distort the market by sucking first-time buyers out of the system.
Persimmon yesterday announced profits of over £1bn, with nearly half of its sales made under the taxpayer-funded Help to Buy.
The firm has also announced a new chief executive, Dave Jenkinson, replacing Jeff Fairburn who stepped down after a furore over his £75m pay packet.
In new data covering Help to Buy from its inception on April 1, 2013, to the end of last September, the Government revealed that there have been 195,219 purchases, funded by taxpayer-backed loans of £10.6bn.
The value of the homes sold under the scheme totalled £49.89bn.
Most of the purchases were by first-time buyers, accounting for 81% of purchases.
Trade body the Intermediary Mortgage Lenders Association says last year was the strongest yet for Help to Buy sales. It is predicting that there will have been 200,000 sales by the end of last year.
NAEA chief executive Mark Hayward yesterday told EYE: “We are seeing increased sales to first-time buyers running at about 26% of sales, with the slowdown in buy- tolet purchases helping the firsttime buyer to be in a more competitive position.
“Help to Buy, though, does not build chains as in effect the buyer is sucked out of the system.”
Property buyer and housing pundit Henry Pryor vented his anger on Twitter saying that 1,000 kids had woken yesterday morning in bed and breakfast accommodation “and government persists with a scheme that directly supports a company making £1bn profits . . . Am I cross? I’m f****** outraged”.
Also highly critical was Joseph Daniels, founder of modular house-building firm Project Etopia.
He said that the £10.6bn spent by taxpayers on Help to Buy was almost as much as the entire current police budget for England and Wales, at £12.3bn.
He said the scheme had created an “artificially robust market” in new-build, and that the amount of money spent on Help to Buy would have paid for over 43,000 homes at full market value.
Help to Buy’s current equity scheme, applicable only to the purchase of new-builds and not to the traditional secondhand stock held by estate agents, is due to continue until 2023, but will end for all except first-time buyers from 2021.
Yesterday, Persimmon shares climbed 48p, or just over 2%.
Sorry to burst all the outraged of…. bubbles but in the past 10 years Persimmon have controlled what it costs to build each property, they have beaten assumed inflationary costs by about £20,000 a plot.
Somehow and I don’t know how they have reduced their plot cost, I guess that is probably down to increasing the build density but that is another significant saving that goes straight to the increase in profit, but the big increase in profits is coming from the market itself.
In the past 10 years property transaction prices have increased at about 3.49% each year; the £167,000 property Persimmon were building 10 years ago ought to be selling at £236,000.
Help to buy naturally focusses the FTB on buying new homes, it is easy to stitch related stories together but at least bother to look at the numbers and balance the outrage with what is happening in the market and what Persimmon have done to increase their profits before jumping to the false outraged conclusion it is all down to help to buy.
If it weren’t for help to buy an awful to of those who have bought would be sat at a breakfast table in a BTL new build owned by the baby boomers who are investing in property rather than in an annuity and pushing up asset (such as property) prices because interest rates are so low.
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It is interest rates that are causing the housing crisis, the governement cannot increase them as Mark Carney said he would because low interest rates are doing what double MIRAS relief did in 1988; distorting the market. The consequences of putting up interest rates with so many people equity released or over extended on mortgages?…. Brexit anyone, unusual weather, Alan Partridge? let’s change the subject quick all that could get rather unpleasant
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In my opinion, interest rates are one of the reasons for the housing problem not the only or biggest one. The governments constant interference in the housing market is the real problem. Help to buy, right to buy, first time buyer stamp duty exemption etc. All policies designed to keep people buying property and keep house prices moving upwards, and of course keep new builds selling.
The house market needs to be allowed to settle naturally without meddling. This desperate need by government to keep their new build mates in substantial profit and bribe young people to vote for them is pathetic and will just make the inevitable correction even worse when it arrives.
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Agreed but the meddling all stems back to the fact that low interest rates/artificial affordability started and are fueling the crisis and that all the interventions have been designed to slow a runaway train without sticking up interest rates and creating financial chaos across the land.
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Apart from the fact that those people that are buying on the help to buy scheme are in negative equity from day 1, as they are paying an inflated price for the benefit of using the scheme.
Then when they need to sell in a year’s time, as a baby is on the way, they can’t. Now they own second hand stock and they are competing in the second hand flat market, where buyers need a decent deposit, can’t access H2B and there is a sea of competition, which further pushes down the price of their home. This isn’t made up, it’s happening.
Meanwhile, the housing crises remains and the profits keep rolling in for national house builders.
As an aside, let’s not forget you don’t have to be a FTB to benefit from the scheme, but that’s another story.
Who is H2B helping the most?………………………….
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Negative equity isn’t a thing until owners HAVE to sell. Whether its a new build or not the first 5 years of a mortgage are challenging. Within 3 years of being married with a 1 year old and wife not working ‘Double Miras’ was done away with, the property market collapsed for 6 years and interest rates hit 12%. Property prices fell back 42% in some cases but 25 years on are 569% up on what they were.
Buying to sell on in a year and hoping for a short term break even or gain on a newbuild? Solicitors bill, stamp duty, mortgage arrangement fees, early surrender mortgage penalties. I am not sure if your plans have changed but all that was a big ask especially if extending the family was on the cards when you bought.
The thing about the housebuilders profits, a lot today’s profit will be passed on to farmers who are selling agricultural land for the next round of development and who in doing so will make more profit per acre than the builders who develop the land
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Persimmon will have cut their costs by continuing to install very cheap products into their homes. I live on a Persimmon built estate and everything in this house was cheap, it has cost everyone around here a fortune to fix everything. Tradesmen such as plumbers just love our estate. One bloke told me 90% of his work comes from fixing things on this estate.
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Sorry but the main problem is that Help-To-Buy has sucked the competition for affordability out of the market as well as value for money and quality of build.
First-time buyers are being duped and will live to regret their purchase decision when the market adjusts itself. There is too much scare-mongering going on, fed by those wanting to sell houses. Unless and until this is addressed by our elected government, the scam must continue. I can’t agree with Robert May on this or on much else it seems.
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This issue is a bit like tax avoidance, don’t blame the people benefiting from it, change the rules/ fix the system! I saw headlines at the weekend that Persimmon might lose their Help To Buy contract largely due to issues mentioned by Jacqueline/Peter above. Is that going anywhere?
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Help 2 Buy – another PPI scandal in the making!!!
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We shouldn’t need Help to Buy in the first place. House prices should be aligned to wages. 3-4 x wage/price, otherwise Low Interest rates will always have to stay in place. Everyone above has made valid points. House prices are too high. Should of let the market correct itself in 08-09 but the Banks couldn’t of taken the Mortgage defaulters on top of their other problems so BOE dropped rates and everyone got used to them . Kicked the can down the road instead. Lots more building is essential to oversupply the market, rather than wait for the other cause, unemployment. Ban Interest only Mortgages on New Builds so that at least the Owners can start off setting the inevitable drop in value.
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Just a quick reminder…
As near as darnit, EVERY home sold by Estate Agents is one that a builder constructed. Whether that was last year… five years ago… or 1742 – whenever that construction took place, it is reasonable to assume that the builder made a degree of profit on the original transaction.
The 200,000ish ‘new homes’ that were sold last year alone (according to various sources) will inevitably become resales in the coming years – bringing a mahoosive wadge of income potential to Agents that I don’t imagine will be refused either on or off the High Street. Whenever that resale takes place, it is reasonable to assume that the Agent will make a degree of profit on that transaction.
Schemes and incentives to buy new have come and gone with the market cycles. Taking advantage of a ‘scheme’ is a risk – but as housing market cycles have proved, the same can be said about the transaction itself.
No-one ever focuses on those that the risk pays off for.
Funny, that…
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