The chancellor’s Help to Buy scheme, a centrepiece of the 2013 Budget, has already beaten expectations with 4,000 new homes sold in the two months since it was introduced.
The figures from the Home Builders Federation, a trade body, provide the first concrete evidence that the scheme is resulting in a rise in sales of newly built homes.
The scheme was introduced by George Osborne, the chancellor, with the aim of stimulating the construction industry and the economy. But critics ranging from the IMF to the Office for Budget Responsibility, the UK’s fiscal watchdog, have warned it will push up prices rather than encourage housebuilders to build homes.
- Under Help to Buy, the government lends buyers up to 20 per cent of the value of a new-build home priced below £600,000, interest-free for five years.
- The HBF said it had received 4,000 registrations – about 500 a week – and that 95 per cent of registrations result in a sale because money has already been exchanged.
- Homebuilders on Wednesday dismissed fears the scheme would inflate a housing bubble by stoking demand without increasing supply.
- Mark Clare, chief executive of Barratt, one of the biggest housebuilders, said completions of new homes would rise 20 per cent compared with two years ago.
- “Our production will rise to meet higher levels of demand. We are investing in land and bringing it through planning too,” he said.
- With hundreds of developers still registering to sell properties through the scheme, the HBF added that Help to Buy had already proved much more popular than previous government incentives to assist the mortgage market.
Stewart Baseley, executive chairman at the Home Builders Federation, said: “The equity loan scheme helps consumers overcome the deposit barrier and as a result the scheme will undoubtedly lead to an increase in house building – already we are seeing companies revise their projected build levels as a direct result of the scheme. This in turn will create jobs and deliver an economic boost.”
The upbeat assertion was backed by Glenigan, a construction consultancy, which has reported that housing starts increased by 32 per cent from 1,270 to 1,680 between April and May this year, compared with the same period last year.
It said that in May alone several large housing projects were started, including a £180m development in Brentford that will be offering properties eligible for Help to Buy assistance.
Glenigan, which supplies data to the ONS, collects information from planning departments across the UK and so can provide an early indication of construction activity.
Although the government intends to use the £130bn Help to Buy scheme to support 74,000 sales in three years, its popularity raises the prospect that the money will run out much quicker.
A second more controversial part of the Help to Buy scheme is due to launch next January. This will give buyers of all properties – not only new build – the ability to borrow with only a 5 per cent deposit. The government will guarantee up to 15 per cent of a home loan as an insurance policy for the banks, as long as the property is valued at less than £600,000.