Help to Buy scheme has pushed up prices for first-time buyers, agent claims

Share this article

The Government’s Help to Buy scheme may be helping first-time buyers to get on the property ladder, but they are paying more for it due to the structure of the initiative, an agent claims.

The Help to Buy equity loan scheme, launched in 2013, provides a Government loan to a borrower of up to 20% of a new-build, 40% in London, worth up to £600,000, with the buyer stumping up 5%.

But independent estate agency James Pendleton warns that the £600,000 limit has led to high numbers of new-builds selling for just below the threshold with many wealthier buyers using the scheme to get higher price properties, rather than the first-time buyers it was meant to benefit.

Using Land Registry data, the firm studied 563 homes sold in hotspots of Battersea, Putney, Tooting, Balham, Wandsworth, Clapham and Brixton in the last year.

The figures showed that more than four times as many new-build homes were sold just below the threshold compared to just over it in the past year.

The analysis revealed that 380 properties across the £575,000 to £600,000 price bracket were sold last year, compared with just 183 properties sold in the £600,000 to £625,000 bracket.

Of the 563 homes in total, 184 were new-builds – making them eligible for Help To Buy – and were sold at just under the threshold for £575,000 to £600,000, while only 38 new-builds achieved between £600,000 and £625,000.

Lucy Pendleton, director of James Pendleton, has noticed two negative consequences of the scheme.

She said that those with smaller budgets are squeezed by those with bigger budgets keen to take advantage of the Help To Buy scheme, meaning first-time buyers can easily end up paying more for smaller properties that have been ‘priced up’ to meet the increased demand.

A secondary effect is that sellers of homes that are not new-builds and are not eligible for Help To Buy nevertheless come under pressure to reduce their prices to compete, further distorting the market.

She said: “Artificially high demand in this price zone just beneath £600,000 will be forcing many to pay over the odds.

“By introducing a Help to Buy threshold and axing Stamp Duty slab tax, the Government has simply replaced one disruptive line in the sand with another.

“These hurdles placed at arbitrary price levels have always had a distorting effect on the market and that’s what we are seeing now, smack bang in the middle of the cost of many one and two-bed flats for young professionals, which is a crucial price point for first-time buyers in these areas.

“This may cause problems when these new-builds are sold on, as they will no longer be available under Help To Buy and sellers won’t benefit from the extra demand the scheme generates.”

Free Property Ad – Reach millions buyers & tenants

Mortgages – Find cheapest rates from 0.98%

Landlord tax – How to save £1000s using a company

Broadband & TV – Compare Sky BT Virgin & Plusnet

Gas & Electric – Save up to £600+ in  10 minutes

Share this article

Written by: Houseladder