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Help to Buy: Boom or Bubble
- 4. The ai m โขโ r ed t ape over pl anni ng pr oc edur es and m t gage l oans ar e or ham per i ng t he gr owt h of t he house bui l di ng i ndust r yโ โขโ al ongs i de t hi s ar e we t ur ni ng i nt o a nat i on of r ent er s , m e i n l i ne wi t h t he Eur opean vi ew of pr oper t y owner shi p?โ or โขโ what i s t he i m pact of Hel p t o Buy ?โ
- 5. Cont ext : t he m ket ar โขLand val ues r em n l ow and t he econom weak ai y โขI ncr eas i ng r at e of pr i vat e r ent i ng, but r ent s not m e or expensi ve t han m t gages i n hal f of t he UK or โขGover nm ent ac t i v el y seeks t o unbl ock pl anni ng hol d ups t hr ough โ At l asโ โข2, 291 hom pur chases c om et ed under New Buy ( t o M ch 31) e pl ar โข3, 000 r eser vat i ons per week under Hel p t o Buy: si nce i t st ar t edโฆ
- 6. 17% 12,500 15 % Help to Buy transactions since launched 3.1% M House pr i cesHousi ng st ar t s or t gage l endi ng
- 7. Housebui l der vi ews: pr e H2B The constraint on mortgages has been an encumbrance to sales โข The whole market had started to stagnate [due to] large deposits and restricted lending on mortgagesโฆ There was a real shortage of first time buyer funding available The overall mortgage pot has shrunk, very substantially, and if there is less money available then clearly it is going to go to those parts of the market that are high value and lower risk After the 2007 property bubble and subsequent crash, the market needed to rebalance. This happened between 2007 and late 2012. By the end of 2012 there was a good match between demand and availability Som pl ayer s l ef t t he m ket / m ged and t hose l ef t have l ess e ar er capi t al
- 8. Housebui l der vi ews: pr e H2B โข New Buy and bui l der sโ shar ed equi t y schem es โ l i m t ed success i โWe had NewBuy come in 18 months ago which was quite a difficult process with banks and mortgage lenders. That had an immediate effect, [but] slow uptake... The reasons are the fees payable etc.โ โThe problem that we had in the industry was we all had quite a lot of cash locked up in the balance sheet for these products.โ โThe other problem was with us having to contribute half as well; you were basically spending a lot of your working capital.โ
- 9. Top bar r i er s t o buyi ng โขHi gh pr oper t y pr i ces, m t gage avai l abi l i t y and di f f i cul t y or i n qual i f yi ng ar e t he t op bar r i er s
- 10. Im pact s of cr ash โขM n i m ai pac t s ar e secur i ng m t gages, i nc r eased concer n or about chi l dr enโ s f ut ur e and r et ai ni ng any di sposabl e i ncom e
- 11. Im pact s of cr ash โขM n i m ai pac t s ar e secur i ng m t gages, i nc r eased concer n or about chi l dr enโ s f ut ur e and r et ai ni ng any di sposabl e i ncom e Especially homeowners (67%) and 45+yr olds (74%) and C2 (70%) 18-24 yr olds (18%) less likely than all others Especially renters (41%) and younger people: 18-24 yr olds (43%) and <45 yr olds (32%) more likely than 45-64 yr olds (9%)
- 12. Hel p t o Buy Helpfulness โขHal f of t hose who have or ar e act i vel y c ons i der i ng buyi ng a hom have hear d of Hel p t o Buy ( 52% , under a t hi r d of t hese e ) t hi nk i t wi l l hel p t hem . 18-24 year olds C1 / DE Renters HTB applicants/ intenders AB Homeowners 55+ yr olds C2 Awareness
- 13. Bui l der sโ at t i t udes t o H2B Helped increase funding availability Lenders responding positively to HTB Better than NewBuy/ First Buy Helpfulness Positive Helped to rebuild confidence and competition in the mortgage market Enquiries, off-plan sales & building rates Scope well designed o โGood f b ut n uilders, r houseb How sustainable is it? Funding may run out before the end of 3 yrs What happens when it finishes? s.โ axpayer ot for t Negative
- 14. M t gage Guar ant ee or Expected to involve a range of lenders Lenders offering โdecent rates and not restricting it through other mechanismsโ Helpfulness Positive Hope offers may be designed to assist the second hand market Controls in place to avoid boom and bust T&Cs unknown Too early to say Scope too broad? Introduced too late How long is the quota going to last? May lead to increased house prices Hiding an underlying wider market fragility? Negative
- 15. Per cei ved i m pact of H2B โขOver whel m ngl y posi t i v e! i โThings have been improving in the mortgage market over the last period.โ "Definitely is stimulating house building. The equity loan ticks all the boxes for affordability of house purchases... it's given us a much more confident position than we were pre-budgetโ โIncreased sales ... Help to Buy really helped the marketโ โWe should get more normalisation, standard 90-95% mortgages coming back at more favourable rates..โ
- 16. Per cei ved i m pact of H2B โขOver whel m ngl y posi t i v eโฆ BUT! i โWe also need a functioning planning system and we need to tackle regulatory burdens on the industry.โ โI see this as being not in place beyond May 2015 and the electionโ โI think there are a lot of things happening at the moment, not just Help to Buyโ โ[Lack of] capacity in terms of skills, bringing trades, sub contractors, suppliers. Also the ability to recruit good staff, as the industry lost a lot of good staff in the down turn.โ
- 17. Help to Buy: Boom or Bubble?
Editor's Notes
- And anecdotally the bank of Mum & Dad is/ has been crucial in helping younger people get a mortgage deposit together Number of first time buyers up โ โThe number ofย first-time buyersย rose to its highest level since 2007 in May, according to the Council of Mortgage Lenders, after banks and building societies became more willing to offer loans to borrowers with small deposits. A total of 25,100 loans were granted to newcomers to theย property market during the month, a 29% increase on April's figure and up by 42% on May 2012, the CML said. It was the highest monthly figure recorded since November 2007, shortly after the property market peaked and house prices started to fall, and a marked contrast to the 8,500 loans granted in January 2009.โ Guardian 12th July 2013 Home ownership peaked 69% in 2001, fell t0 64% in 2011 and expected to have fallen further since then http://www.guardian.co.uk/money/2013/jun/28/new-class-landlords-profiting-generation-rent. Social renting down from 31% in 1981, private renting up from 11% in 1981โ both 18% in 2011. Private renting up from 10% in2008 (crash) to 15% in 2011 and i same time the proportion owning a home with a mortgage fell from 40% to 35%. (ONS) http://www.bbc.co.uk/news/uk-21697044. Unaffordable rents - Resolution Foundation โThe report, Home Truths, found that in 125 of Britain's 376 local authorities, a couple with a net income of ยฃ22,000 a year and one child would have to spend more than 35% of their income to rent the least expensive two-bedroomย property, making it unaffordable to live there. In 10% of local authorities rent would soak up more than half the family income after tax.. In 2012, the Joseph Rowntree Foundation calculated that a family with one child needed ยฃ19,510 afterย housingย and childcare costs to have enough money for basic necessities..โ http://www.guardian.co.uk/money/2013/jul/15/private-rents-price-out-poorer-families 160713 Most stats from Savillsโ A demand for residential development land, 14 May 2013 Rent levels http://www.independent.co.uk/property/rising-rents-price-poorer-working-families-out-of-a-third-of-britain-8708938.html Reservations stats = FT http://www.ft.com/cms/s/892bf0bc-b897-11e2-a6ae-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F892bf0bc-b897-11e2-a6ae-00144feabdc0.html&_i_referer=#axzz2YT0qQRPl-
- From 2007, builders attempted to overcome restrictions on lending by offering shared equity schemes
- High property prices โ esp younger and C1 C2, also Scotland, NW, Wales & SE Lack deposit โ esp younger, E Mids and Wales , less NE, W Mids, Eastern and SW Also qualifying esp 35-44 yr olds Lack mortgage availability - esp 18-24 Lack property esp AB, W Mids, SE least for Wales Falling value โ less for 18-24 and NE & Wales, more for NW, W Mids No barriers โ least for younger & NW, more for NE
- Perceived impact on ability to secure a mortgage greatest amongst lower social grades
- Better than NewBuy: Because HCA cut their teeth on the First Buy schemes they were quite well honed for HtB. When we registered online for HtB we had an option where you could request a fast approval process which we did and they turned it around quicker than the normal time frame which was welcome. Anon (NB NewBuy was โtortuousโ)
- Juryโs out โ but hopeful!
- โVirtually all builders in the UK are not building efficient delivery rates on sites, we have been constrained by demand ... on an average site we are building only 60% p.a. of what we would have built in the better days. There is huge potential to increase the number of plots completed on each site each year. So that gives confidence to get more efficient build rates.โ Anon
- โVirtually all builders in the UK are not building efficient delivery rates on sites, we have been constrained by demand ... on an average site we are building only 60% p.a. of what we would have built in the better days. There is huge potential to increase the number of plots completed on each site each year. So that gives confidence to get more efficient build rates.โ Anon So, given these constraints, is there a bubble coming? .....