Your IndustryJan 21 2016

Help to Buy London impact on property market

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Help to Buy London impact on property market

The 2015 Autumn Statement saw the government promise to help those struggling to buy their first home while adding to levies for property investors.

Lee Hartley, chief executive of Fairstone Group, points out the launch of Help to Buy London is set to come just as the chancellor sets a new 3 per cent surcharge on stamp duty for buy-to-let properties and second homes from April 2016.

This tax increase is expected to raise almost £1bn by 2020.

Mr Hartley says the 3 per cent increase in stamp duty will drive volume into the buy-to-let sector ahead of implementation in April and thereafter he expects to see a movement in capital away from buy-to-let properties and into traditional regulated investments.

But he adds the Help to Buy scheme in London will increase the rate of new home purchases in that region, so we can expect to see this fuel an uplift in new mortgage borrowing as a direct result.

Adrian Gill, director of Reeds Rains and Your Move estate agents, says the 2015 Autumn Statement showed once again that the chancellor likes to use housing as his prize pony.

The chancellor was short-sighted not to incentivise affordable homes for rent Jeremy Blackburn

Mr Gill says: “His latest trick of a London Help to Buy scheme should be extremely well received.

“The chancellor will always face a delicate balancing act between various different camps, and he has clearly chosen to champion homeownership – but many others may lose out as a result.

“First-time buyers of the future are tenants now. So with rents rising at generally the same speed as house prices it is not clear how hitting landlords will help homeownership in the long run.

“Levying an additional 3 per cent stamp duty on buy-to-let purchases has introduced a massive stumbling block to supply in the private rented sector.

“The government is essentially giving with one hand, while taking from another further down the line.”

Jeremy Blackburn, head of policy at the Royal Institution of Chartered Surveyors (Rics), says the push towards affordable home ownership should not have come at the expense of affordable homes for rent.

He says if cities such as London are to thrive, we need to ensure that housing can be provided for all workers and home ownership can only go so far and even shared ownership may prove too expensive for some.

Mr Blackburn says: “The chancellor was short-sighted not to incentivise affordable homes for rent.

“George Osborne is essentially subsidising one sector of the housing market over all others, as home buyers already benefit from significant government funding.

“Many people struggle to afford to own their own homes and a large majority rely on the available supply of affordable rents.

“The chancellor may feel that he is supporting the under-privileged by pushing up buy-to-let stamp duty, but we would argue that such an inflationary measure will discourage small landlords and reduce the rental supply – prices will inevitably rise.”

Speaking ahead of the launch of the scheme at the start of 2016, Andrew Bridges, managing director of estate agent Stirling Ackroyd, says it is difficult to predict the precise effect that Help to Buy London will have on the property market.

Compared to what might have happened without the scheme, Mr Bridges says Help to Buy London will probably boost transaction volumes and price growth slightly over the short term.

But in the medium term, after a year or two, Mr Bridges says the biggest effect will probably be to boost house prices.

Mr Bridges says: “The focus on new build properties may help to stimulate residential building in the capital, and faster price rises will be focused on new homes specifically.

“However over the longer-term, home builders will probably remain restricted by London’s planning regulations.”

With the London version of the Help to Buy scheme requiring just a 5 per cent deposit up to the value of 40 per cent of the property, Simon Checkley, managing director of mortgage broker Private Finance, says we will really begin to see a significant effect on the local market.

Mr Checkley says he expects Help to Buy London will liberate even more people out of rented accommodation where prices are at their highest.