Prime Minister Theresa May yesterday announced a £10bn extension to the government’s Help to Buy scheme, delivering a big boost to British housebuilders who had feared an end to the subsidy programme for house buyers.
Another 135,000 people will be able to use the scheme to buy property, according to the Prime Minister, who announced the extension as part of an attempt to appeal to younger voters ahead of this week’s Conservative party conference in Manchester.
Housebuilders’ share prices are expected to retread most of the losses seen at the start of August, when an industry journal reported the government had tasked a team of economists to review the scheme.
Persimmon and Gleeson use Help to Buy the most, but the industry as a whole uses the scheme on 33 per cent of new completions, according to Charlie Campbell, housing equity analyst at Liberum.
Robin Hardy, equity analyst for housebuilders at Shore Capital, said: “We saw the wobble that the suggestion of Help to Buy being ended a few weeks back had on the sector, so it would not be unreasonable to expect the reverse of this.
He said: “There has been some pre-emption [by investors] ahead of the conference as it became clearer that policies biased towards reactionary and younger voters would emerge, so we may already have had some of the impact – but there is likely to be more.”
Less than half of the millennial generation (born after 1980) will buy a home before the age of 45, compared to over 70 per cent of the post-Second World War baby boomers, according to the Resolution Foundation.
While the programme is aimed at allowing more younger people to own homes, some analysts blame the Help to Buy programme for sustaining rapid increases in house prices, making homes less affordable overall.
Polly Neate, chief executive of Shelter, a housing charity said: “Extending Help to Buy is the wrong priority at a time when over a million renters are struggling with crippling housing costs.
“Help to Buy has barely helped the first-time buyers it is targeted at and has done nothing to help those worst affected by our broken housing market and those at risk of homelessness. Moreover it has increased house prices and propped up a speculative development model in need of reform.”
Further extending the programme is akin to “throwing petrol onto a bonfire” in a “dysfunctional” housing market, according to Sam Bowman, executive director of the Adam Smith Institute, a right-wing think tank.
He said: “Adding more demand without improving the supply of houses is just going to raise house prices and make homes more unaffordable for people who don't qualify for the Help to Buy subsidy.”