The London housing market is being badly distorted by the arbitrary £600,000 upper threshold of the Help to Buy scheme which is pushing prices up for first-time buyers, estate agent James Pendleton have warned.
A study of seven London development hotspots by the estate agent showed more than four times as many new build homes were sold just below the threshold compared to just over it in the past year.
Analysis by James Pendleton showed a total of 83 per cent of new build homes sold between £575,000 and £625,000 in seven key areas achieved less than £600,000.
Through the Help to Buy equity loan scheme, the government lends up to 20 per cent of the purchase price (and 40 per cent in London) so buyers don’t need to raise as much of a deposit to buy a new build home.
However, it only applies to properties worth up to £600,000, which James Pendleton’s experts warned is squeezing the market, creating a vacuum in properties selling between £600,000 and £625,000 - and storing up problems for the future.
The study showed 380 properties across the £575,000 to £600,000 price bracket were sold in Battersea, Putney, Tooting, Balham, Wandsworth, Clapham and Brixton in the last year. That compares with just 183 properties sold in the £600,000 to £625,000 bracket.
Of the 563 homes in total, 184 new builds - making them eligible for Help To Buy - were sold at just under the threshold (£575,000 to £600,000) while only 38 new builds achieved between between £600,000 and £625,000.
Lucy Pendleton, co-founder of James Pendleton estate agents, 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.”