A Shot of Adrenalin for the Housing Market.

As with all government economic policy, there has been much colourful commentary from all quarters regarding the ‘Help to Buy’ scheme, a lot of which is politically charged ‘tit-for-tat’ with more spin than Shane Warne in his prime. What is certain however, is that this scheme will stimulate the UK housing market over the short term like a shot of adrenalin – the outcome of which will either be a sustained recovery for the long term, or a temporary sticking plaster, at risk of falling off at the first prod.

Outside London, the property market desperately needs this impetus. Prices have risen anaemically for some time, but in real terms haven’t risen for a number of years.

What many commentators have failed to grasp or appreciate is that London is a completely different and separate market to the rest of the UK and should be treated as such. Over the last 12 months, we’ve seen price increases of between 10% and 20% in a large section of prime London, which naturally begs the question, ‘if the London housing market is doing so well, why does it need this stimulus’?

The answer is this: Property prices in London are rising rapidly as a direct result of a chronic shortage of housing stock. With so much demand for London property (in some of the areas we operate, we have nearly 30 buyers registered for every property on our books), the London property market needs this stimulus to free up mid-ladder buyers (first time sellers) in order to create a much healthier balance between supply and demand, and it’s these buyers especially who need help to meet the often stringent lending criteria of the banks.

With around 50% of transactions in prime central London taking place with international, chain-free buyers, many sellers find themselves in an impossible game of ‘chicken & egg’; prospective sellers don’t want to put their property on the market for fear of not being able to find an onward purchase, but at the same time, when the right property does come up, they are not as attractive as those without a chain or those already under offer. This is a vicious circle which is constraining supply, leaving some homeowners in a virtual limbo and therefore not selling at all.

Freeing up this stock is the key to improving the overall health of the London property market and is something which will be aided by the introduction of ‘Help to buy mortgage guarantees’. This extension of the existing ‘Help to Buy scheme’ also requires a 5% deposit, however will be available to both new builds and second-hand homes, which will almost certainly increase volume of stock to the market and going some way to ease the problems with supply.

In a nutshell, this means ‘chicken & egg’ sellers’ chances of finding their perfect property will be vastly improved, whilst at the same time instilling greater confidence to accept an offer on their own property. That said, this scheme won’t last forever and my advice (especially as the Chancellor has brought the launch forward) is to do your homework and be ready to make your move ASAP. This is a rare and excellent opportunity – grab it with both hands and don’t look back!