Wednesday, 1 November 2017

Good work by Morgan Stanley

From The Guardian:

… the Morgan Stanley report, headlined “The help to buy premium – and its unintended consequences”, drily unpicks the data, revealing how the beneficiaries have been the major developers.

Researchers compared the price of new-build houses in 2013, when the scheme began, with the price of existing or “second-hand” houses. There has always been a small premium for new-build; people will pay extra for spanking-new kitchens and bathrooms. But since 2013, that premium has rocketed.

“The divergence between new-build and second-hand prices is higher than it’s been since records began,” says the report. It says that the price of new-build has outstripped second-hand by 15% since the start of help to buy. “We are now around 5% points away from the level at which new-build prices have diverged by the full amount of the government’s equity loan (20% of house price across England).”

I suppose it's possible that for every £100 of HTB subsidy, homebuilders get more than £100.
Let's say there are 10 new homes with an original price of £100 each, now inflated to £115.
There's £100 of subsidy on offer.
Four of the new homes are bought by people using an HTB to loan, i.e. £25 each.
The other six new homes are bought without HTB.
The builder actually makes an extra profit of £150, being 10 x £15.


Steven_L said...

In Aberdeen you can get a good quality granite, central location, stagger home from the town centre / get a student lodger with on street parking 2 bed flat for £125k.

HTB is capped at £200k in Scotland. So Barratts city centre flats start at just under £200k. I wonder if when the HTB cap comes down to £175k next year the new build 'starter flats' will follow?

Personally I can't see why anyone would bother. You can get a really good central 3 big bedrooms granite flat for £150-160k.

Following the oil and gas slump, Aberdeen prices now seem to be back down to circa 2008 prices. I'll maybe take the plunge in a year or so, get a 95% mortgage and a couple of lodgers to pay it for me.

Lola said...

Serendipitously I was a the annual local property breakfast this morning, and even there they were beginning to understand that all HtB does is subsidise house builders/landowners.