The government tried to have its cake and eat it with Help to Buy: Now it must stop

 
Emma Haslett
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Help to Buy has boosted transactions - but it's boosted prices too (Source: Getty)

End-of-year results from housebuilders this week painted a surprising picture of the UK’s housing sector: pre-tax profits at Redrow jumped by a quarter, while at Persimmon they rose by a third.

On Wednesday, investors were so devastated to learn of Barratt’s paltry 12 per cent climb, they sent its shares down five per cent in penance.

This, against reports of an increasingly sluggish market. While Halifax said yesterday house prices had barely crept up in August, figures last month by the National Association of Estate Agents showed fewer properties were put up for sale this July than during any other July since 2002.

Housebuilders’ golden goose is Help to Buy, the scheme which helps first time buyers get their hands on homes by guaranteeing their mortgages, or simply giving them free money - but which only applies to new-builds.

The scheme has proved a runaway hit among first-time buyers: the Help to Buy Isa alone has paid out £54m, helping buyers purchase almost 63,000 homes, while the equity loan part of the scheme has helped 121,000 people. It helped the government, too, enticing young voters by giving them free money to buy their first home, while keeping the property-owning electorate happy by propping up house prices.

But the scheme has become increasingly addictive to housebuilders. Some 55 per cent of Persimmon’s private transactions take place under Help to Buy, according to analysis by Jefferies, while the figures for Taylor Wimpey, Crest Nicholson and Redrow are 52 per cent, 49 per cent and 42 per cent respectively.

Now the government has pledged to end its support for the scheme in 2021, effectively kicking the problem of increasingly unaffordable homes to the next generation of buyers, who will face the higher prices, but will not benefit from the free cash this generation are getting.

Housebuilders have, naturally, already begun calling for Help to Buy’s extension. Tempting though it may be to avoid a potential crisis by bowing to their demands, the government should resist them. Trying to have its cake and eat it was always going to be a risky strategy: extending the scheme will only make things worse.

Read more: Global house price growth falls as the UK slips lower in the rankings again

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