The Help to Buy scheme was originally brought in by the government as a short-term solution to assist first-time buyers and those who needed a helping hand to get onto the property ladder. The equity loan scheme that was launched in 2013, has supported around 240,000 property purchases which equates to approximately £13.46 Billion. Over 190,000 (81%) of these were first-time buyers.
This equity loan that allows eligible purchasers the ability to buy a new build property with only a 5% deposit, is due to be scaled back in 2021, when it will be restricted to first-time buyers only and new regional price caps will be introduced, with the scheme ultimately ending in March 2023.
For example, the maximum property purchase through the scheme in Yorkshire & Humber will fall from £600,000 to a regional price cap of £228,100. These revised caps are set at 1.5 times the estimated regional average cost of a home for a first-time buyer.
These regional caps will result in the scheme only applying to homes below a certain value and this ceiling price will of course vary from region to region. This will also mean that high value areas could in effect, suffer if new build property prices are above the proposed regional price caps.
At the present time, the government is not intending to introduce any further Help to Buy Equity Loan schemes after March 2023. Even though the Help to Buy scheme will not be missed by everyone, it has been of great assistance to a number of first-time buyers who would not have otherwise been able to purchase their first property without it. One of the criticisms that was often directed at the scheme, was that it had in fact artificially inflated the prices of new homes and was therefore, making the national house builders/developers the main beneficiaries of the scheme.
After the Help to Buy scheme has ended, it may be essential for a follow on scheme to be implemented from 2023 to preserve buyer demand levels if the Government's annual target of 300,000 new homes is to be met.
The new First Homes initiative that was recently announced is the latest government high-profile initiative, conceived to get key workers such as nurses, firefighters and teachers on to the property ladder in their local area.
Although there are different routes to property ownership that are starting to emerge, including Shared Ownership which will have significant roles to play in the property market and are proving to be popular with aspirational home owners, they alone will not replace the void that will be left by the end of the Help to Buy Scheme.
Time will tell whether the SME developers are able to take advantage from the withdrawal of the Help to Buy scheme, as this will leave undoubtedly leave a gap in the market and it is therefore, crucial that the developers strategise the best way to navigate this situation and create incentives for the first time buyers who will no longer have access to this scheme. It's likely that there will be a rise in private rental schemes, with the smaller developers looking to enter the build-to-rent property market, but this is not always achievable for the smaller SME house builders. It's also worth noting that a reasonably-priced, high quality new homes development, with a traditional marketing approach, will always have a place in the property market, as it has done both before and throughout the Help to Buy period.
In spite of the concerns over how the withdrawal of the Help to Buy scheme will impact the housing market, the Government has not given an indication on what alternatives are planned as a substitute. This indeed, will be yet another challenge for the property market, the developers and of course the first-time buyers. But as the country and indeed the entire world are looking to move forward from the devastation caused by Covid-19, there is still hope that new opportunities will develop and arise in the not too distant future.