Metro - 28 March 2013
Help to Buy
By Jo Eccles
In last week’s Budget, the Chancellor announced a new measure to help buyers onto the property ladder. At the time of writing this column, however, I was amazed to see how many mixed (and often confusing and conflicting) reports there are about the Help to Buy scheme. Despite the newspaper inches and airtime, I feel fairly confident in saying that if I stopped most people in the street, they wouldn’t be able to give me an accurate lowdown on the details, which means that potential buyers will possibly miss out on benefiting from the scheme as they don’t understand it properly.
In my opinion, this unfortunately sums up quite a lot of the housing schemes the government have put in place. Although their intentions are good, I’m not convinced about the long-term outcome.
Help to Buy is designed to help those who would like to get onto the property ladder but can’t afford to. By and large, buyers can’t afford to get onto the property ladder at present because prices are too high. We’ve seen prices go up (particularly in London and the South East), but wages haven’t been able to keep up and affordability for most people has evaporated.
From an economic perspective, the government would be better placed addressing the unaffordability issue in the housing market – from a very basic angle, this would either mean wages going up or house prices going down. House prices going down would be easier, but it would squeeze a lot of people and wouldn’t win many votes. Therefore, the government has chosen to help buyers buy into inflated prices. It’s a vote winner and addresses the problem, if not just for the short-term.
Given the government’s intervention, it looks as though unaffordable house prices are here to stay for the foreseeable future. Therefore, there’s no option but to wade in and get involved, with or without the government’s help (if you can figure out what it is exactly).