Help to Buy regional statistics and impact on property prices

publication date: Mar 24, 2014
author/source: Kate Faulkner author of the Which? property books

Help to Buy latest figures for BBC on the impact by region on house prices

Following on from the BBC's coverage of the Help to Buy stats, the take up of Help to Buy has sparked all the normal reactions of ‘causing a bubble’ and ‘raising prices longer term out of first time buyers' reach’.

But the figures don’t suggest that either of these claims are correct, and now the new build scheme has been extended until 2020, the likelihood of a ‘bubble’ due to short term incentives has dissipated.

The top four areas for both Help to Buy Schemes are:-

Region Land Registry YoY price changes
South-West 2.6%
North-West 2.6%

London, where prices are up 11% year on year, almost doesn’t register on the ‘take up’ for H2B. In Hackney for example, where prices have been up the most (+20%), has only had five takers (yes I did get that correct: five!) so hardly affecting prices.

Different schemes are proving popular in different areas:-

In the South East, East, South West and North West, these are popular for the Help to Buy new homes scheme and account for half of the scheme's volumes.

Scotland, the North West, South East and Yorkshire and Humber are the biggest for Help to Buy 2 for existing or older homes, and account for over half the take up.

Visit the BBC news for more details

Has the Scheme been a success?
To some extent, you can call the Help to Buy announcement a success in itself. It got people out looking for homes to buy and helped 'kick start' the market.

As far as the volumes are concerned, we are looking at 17,000 over nearly a year, which is nothing compared to the 800,000 properties we sell each year. However, numbers are coming up to around 2,500 each month for each scheme, so now the schemes are accounting for around 5,000 property sales out of around 75,000 to 80,000 per month, ie around 6%, so still not enough to affect house prices.

In truth, the amount of sales gone through via 'Help to Buy' are tiny, and so to some extent, the actual scheme hasn't drive the sales it planned to.

However, the Help to Buy Scheme has:-

  • Kick started the whole property market, most areas are now growing in price or at least stopped falling.
  • Helped to support 15,000 x 3.5 jobs - according to Barratt, this is how many jobs are created by one new build: 50,000 jobs.
  • Driven £2.86 back into the economy, mostly at a local level, for every £1 spent on a new build, so assuming that's £70,000 x 15,000 x £2.86 = £3 billion.

Problems with Help to Buy
But it's not all rosie in the world of H2B! There are issues:-

  • It appears to be funding purchases that it shouldn't - some first time buyers who had saved a decent sized deposit are now using a lower 5% deposit to buy a bigger property.
  • Some first time buyers are possibly overstretching themselves and may not be able to afford the property at 5%+ mortgage rate levels.
  • It is only attracting first time buyers. 90% of the stock for sale is existing homes and to get this stock onto the market, we need far more 'second steppers' using help to buy to trade up to release much more stock onto the market. 

Do we need Help to Buy 2?
I think lenders are OK at lending at 95% levels. The guarantee the government is giving is no different really to the one that Genworth would do under the normal practice of 'mortgage indemnity' agreements. It's used elsewhere in the world. It used to be used here, so it can easily replace the government's assurance.

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