How the Help to Buy scheme is distorting the London housing market

Helen Cahill
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Report Warns Average Deposit For First Time Buyers In London To Rise To Over 100,000 GBP By 2020
The Help to Buy scheme is designed to help first-time buyers onto the housing ladder (Source: Getty)

The Help to Buy housing scheme is distorting London’s housing market due to the scheme’s threshold level.

The top price buyers can purchase a house on the scheme for is £600,000, meaning there is a lot of demand for properties just under this price in the capital.

Read more: Help to buy has built up housebuilders - but it can break them down, too

Research by James Pendleton has found that 83 per cent of new build properties sold between £575,000 and £625,000 in seven areas of the capital sold for just less than £600,000 threshold.

The study focused on properties sold in Battersea, Putney, Tooting, Balham, Wandsworth, Clapham and Brixton in the last year.

It found 380 properties across these areas were sold in the £575,000 to £600,000 price bracket over the past year, whereas just 183 properties were sold in the £600,000 to £625,000 bracket.

Through the Help To Buy equity loan scheme, the government lends up to 20 per cent of the purchase price (and up to 40 per cent in London) so buyers don’t need to save for as much of a deposit when they are searching to a new build home.

The London plan places minimum limits on the size of homes developers can build, leading to developers building relatively well-sized properties under this £600,000 price level.

Read more: New homes on sale in Holborn, Clapham and Chiswick this weekend

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