12 Apr 2018
By Eric Curran, Managing Partner of DM Hall Chartered Surveyors, based in the firm's Glasgow North office.
In a property-owning democracy – to which, despite the ups and downs of the past few decades, most people in the UK still aspire – anything which allows young people to achieve the dream of their own space has to be unreservedly welcomed.
So the news that the Scottish Government is extending its ambitious Help to Buy scheme for another two years will bring a measure of good cheer this Spring to thousands of hopeful buyers for whom the prospect of a home of their own has inched slightly closer to reality.
First time buyers – and, it has to be said, existing home owners – will be able to support their purchase with the help of a 5% deposit and a 15% interest free Government equity loan.
The scheme, which concentrates on properties valued at up to £200,000 – ie, affordable homes in today’s increasingly competitive market – will come at a cost of a further £100 million over a two-year period starting in April next year.
This is on top of a massive ongoing investment which, since 2013, has helped more than 12,000 households to realise their property ambitions. The extension period should benefit another 4000 households.
This is all very laudable. But it is also quite reasonable to ask a few pertinent questions based on the old legal dictum of cui bono, or who benefits?
Clearly, the lucky buyers in the schemes are primary beneficiaries, as are the wider public who should gain from speculative development, construction employment and knock-on gains down the supply chain.
Builders, too have been incentivised by the schemes and are more able to make their properties achievable without a purchaser having to raise a deposit of up to 20%, an insurmountable obstacle for many people.
But the obverse side of the “who gains” coin is who loses? And it could well be argued that the people most disadvantaged are buyers and sellers in the much larger second-hand housing market in Scotland.
There are countless prospective first-time buyers in trying to gain a foothold on the ladder through the traditional route of buying a home previously owned by someone else. Why should government assistance be withheld from this sector?
Sales of second-hand homes vastly outnumber new build sales in Scotland and they contribute quite as much to the economy through subcontractors and trades people carrying out home improvements, extensions and alterations.
Far from being given any assistance to get their hands on a title, second-hand buyers face an obstacle course set up by risk averse lenders who are themselves shackled by regulator-imposed capital reserve rules.
Some observers have concerns that an unintended consequence of the schemes could be price inflation, with builders able to use the incentives to generate premium prices, as well as the upsizing effect for existing home owners.
We need new homes. There is no question of that. But is it really in the wider market’s interests if the new build sector is encouraged to gorge on a diet of government incentives which it receives to the exclusion of all other property types?
It is legitimate to ask if Help to Buy schemes simply push up prices across the board while funnelling funds into one, effectively subsidised, sector. If the aim is to help first time buyers, why is that help confined to 5% to 10% of the market?
Scottish Housing Minister Kevin Stewart has said in relation to the extension of the schemes that “housing is about more than bricks and mortar”. He is absolutely right. As well as new developments, it is also about the huge previously-owned market, and concerns about that should perhaps also be given some Ministerial attention.