Help to put up prices
People who use the government’s Help to Buy scheme to acquire their first home are paying 12% more than people who buy new-builds without the scheme, according to conveyancing comparison site Reallymoving. The company looked at 44,000 quote requests from users of its site, and found that in February people buying through Help to Buy paid an average of £303,000 this year, compared with £270,000 outside of the scheme. Last October, the gap was 8%.
The government’s Help to Buy equity-loan scheme lends first-time buyers up to 20% of the value of a new-build home. The loan is then interest-free for five years. But “these figures suggest that buyers may be paying more than the property is worth in order to get the help they need to raise a deposit”, says Rob Houghton of Reallymoving. “This could either be because developers are charging a premium or first-time buyers are encouraged to buy a more expensive property because the scheme gives them greater spending power.”
Reallymoving’s figures are only representative of a portion of the market. But they support the idea that Help to Buy has artificially inflated demand for housing and helped push up prices. The risk is that people overpay for a property, and then when they come to sell, it is worth less than they’d like; they struggle to sell, and have not built up as much equity as they hoped. Moreover, as it’s no longer a new-build, the house won’t be eligible for Help to Buy and thus cannot benefit from demand being fuelled up by the scheme.
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