Market Insight - May/June 2018
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Focus Economy Sales Lettings Stat of the Month


Help to Buy

In April the current Help to Buy (Equity Loan) scheme will be five years old and seems to be becoming a progressively bigger part of our housing market.

Since April 2013, 120,864 homes have been bought using Help to Buy, making up £35bn worth of property and £8.4bn of equity loans. The latest Land Registry data shows 423,000 new homes sold in England between April 2013 and June 2017, meaning that over the five years Help to Buy has been in existence, it has made up 29% of new home sales. As the programme has gained momentum the take up has increased, and today Help to Buy is a bigger part of the new homes sales market than it’s ever been.

41% of new home sales in the first six months of 2017 involved Help to Buy, quite a jump from 33% in 2016. The number of development sites offering Help to Buy has steadily increased over 2017, meaning we will likely see more sales using the scheme in 2018 too. Our analysis shows that 75% of new sites are now offering the scheme on some or Inflation, which measures the average change in prices of goods and services, slowed to 2.5% in February. The Consumer Prices Index including housing costs (CPIH) measure of inflation fell from 2.7% in January to 2.5%, the lowest level since March last year. This is good news for households as it means the average costs of goods and services aren’t rising as quickly as they were. The fall in inflation was mainly caused by prices for transport, food, restaurants and hotels rising less than last year. February’s fall suggests that the UK has past peak inflation and price rises will ease over the next few months. Inflation rose last year on the back of sterling’s decline following the EU Referendum as the cost of imports rose. But now we’re further down the line, the index is comparing prices in February 2017 with prices in February 2016, which means that average prices aren’t being compared with pre-referendum lows which inflated the figures. Help to Buy Sales The good news for households is that the latest data for earnings and inflation suggests that the squeeze on incomes could be coming to an end. Inflation has been rising faster than earnings over the last year, which has squeezed household’s disposable incomes. But with wage growth rising to 2.8% in January when inflation slowed to 2.7%, we could start to see real incomes rise again soon if the trend continues. We shouldn’t get too excited just yet, though. Wages have got a lot of catching up to do and any future fall in inflation is likely to be slow and gradual. Overall, this is good news for households and means that families might have a little more left over at the end of the month. all their homes, up from 70% in 2016. Most of this increase has been driven by smaller housebuilders deciding to offer the scheme for the first time.

With the increasing adoption of Help to Buy, it’s hard to see how the industry would reduce its reliance on the scheme without significantly pulling back sales activity and thus build rates. Does that mean the house building industry is permanently hooked on Help to Buy? This is a particularly important question today, as five years on the interest free period for first buyers using the scheme is coming to an end.

Those of the 14,000 households who bought in 2013 who haven’t sold on or paid off their equity loan (the majority) will start paying interest on their loans from April. There has been plenty of speculation on what previous buyers will do when they must start paying more in interest. The truth is we won’t know until the end of 2018 how people’s behaviour is changing, but it will certainly impact the re-sale market and have wider implications for the sector.

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