Criticism that Help to Buy is fuelling a house price boom took a well-deserved knock today when official figures revealed that it was being used almost entirely by first time buyers to buy property at below average market prices.
The figures released by the UK government relate to Help to Buy UK – the version that offers a government backed guarantee for those with a 5% deposit. Figures for Help to Buy Scotland – which is administered by the Scottish Government – are released separately. You can find more information on both versions here.
In Scotland, 80% of all purchases under Help to Buy UK were to first time buyers. And the average price paid was £112,000 (you can see the data here) well below the average residential price of £153,000 as reported by the Registers of Scotland. Moreover, the average income of the buyer was over £41,000, putting to rest concerns that it would tempt buyers to overstretch themselves financially.
Overall, a slightly higher proportion of Scots have taken advantage of the scheme than the size of our market might suggest. Scotland accounts for very roughly 10% of the UK property market, but 13% of Help to Buy UK purchases were for Scottish property.
In contrast, Help to Buy in London was used for just 5% of purchases, far fewer than the size of that market would suggest and nothing like enough to be the driver of the much vaunted house price bubble in the south.
Finally, it looks like Help to Buy Scotland(which is exclusively available on new build homes) is doing well too. Although house building is well below target levels with just over 14,000 completions in the last full year compared to a target of 35,000, there are signs that house building is picking up, partly driven by Help to Buy. You can find more data on new build starts and completions here.
Homes for Scotland says that the scheme has generated over 3,000 reservations and sales since its launch. While that is not a huge number in itself, Chief Executive Philip Hogg says that the scheme “Has had a very positive impact …providing builders with the degree of certainty they need to begin increasing production and buyers with the confidence to purchase.
To summarise; Help to Buy is triggering new construction, helping those who need it most to get on to the property ladder and being used most in those areas where price rises are at their lowest. Moreover, it is the one scheme that allows buyers without the support of the bank of mum and dad to compete in the market with those who have benefitted from parental support.
All in all, it looks like Help to Buy in both its variants is doing a good job.