Win­ners and losers in Help to Buy pledge

The Daily Telegraph - Property - - 7 -

in­creased in­come and cor­po­ra­tion tax paid by house­builders plus stamp duty paid by home­buy­ers. How­ever, the terms are so easy that the Trea­sury had to em­pha­sise the scheme is not open to land­lords and the Chan­cel­lor has stressed it is only in­tended for owne­roc­cu­piers. Although it re­mains un­clear how th­ese re­stric­tions will be en­forced.

The sec­ond part of the scheme will be avail­able from Jan­uary, giv­ing those who wish to buy any home, whether new-build or ex­ist­ing prop­er­ties, a gov­ern­ment­backed guar­an­tee on 20pc of the mort­gage. This ef­fec­tively means that mort­gage com­pa­nies shoul­der less of the risk of bad debts, so should pro­vide bet­ter mort­gage deals.

But wish­ing is not quite the same thing as get­ting. Ear­lier at­tempts by the Government to stim­u­late the hous­ing mar­ket have dis­ap­pointed. For ex­am­ple, NewBuy, the ex­ist­ing, more lim­ited ver­sion of Help to Buy, led to just 1,522 hous­ing com­ple­tions in its first nine months.

Lack of hous­ing sup­ply is a fun­da­men­tal cause of home­own­er­ship be­com­ing un­af­ford­able. To take a very long view, last year I col­lated data from Hal­i­fax, Bri­tain’s big­gest mort­gage lender, and Bar­clays Cap­i­tal, an in­vest­ment bank, to com­pare re­turns from hous­ing and shares dur­ing the six decades of Queen Elizabeth’s reign.

Nearly 202,000 new homes were com­pleted in the year be­fore the corona­tion and new-builds peaked at 426,000 in 1968. That lat­ter fig­ure is more than four times the cur­rent rate of build­ing. But dur­ing the same pe­riod, the pop­u­la­tion of Bri­tain in­creased by more than a fifth from 50mil­lion to 62mil­lion.

Even if the pop­u­la­tion had re­mained static, de­mand for hous­ing would have in­creased be­cause fewer peo­ple now live in tra­di­tional fam­i­lies. The per­cent­age of homes oc­cu­pied by sin­gle peo­ple has soared from 19pc to 33pc, while the seg­ment by mar­ried cou­ples has nearly halved to 40pc to­day.

An­other fac­tor is that pro­vi­sion of hous­ing as­so­ci­a­tion and coun­cil homes col­lapsed by 81pc, ac­cord­ing to the De­part­ment for Com­mu­ni­ties and Lo­cal Government. Mean­while, home­own­er­ship has dou­bled from 32pc of all house­holds to 66pc last year.

Given those facts, per­haps it is no sur­prise that bricks and mor­tar have proved a much bet­ter long-term in­vest­ment than shares. Hal­i­fax reck­ons the av­er­age house price was just £2,200 when Her Majesty as­cended the throne, but is now nearly £164,000. That is more than three times the in­crease in in­fla­tion, as mea­sured by RPI, over the pe­riod.

By con­trast, £100 in­vested in a bas­ket of shares rep­re­sent­ing the chang­ing com­po­si­tion of the Lon­don Stock Ex­change in 1952 would have grown to just £4,430. Bank de­posits lagged even fur­ther be­hind, with a to­tal re­turn of just £250.

Help to Buy will en­sure that bricks and mor­tar con­tinue to de­liver real re­turns to homeowners. But it is much less clear whether it will help home­buy­ers or what the “re­turn” to tax­pay­ers will be.

Dream or re­al­ity? Help to Buy is in­tended to of­fer young cou­ples a gen­uine op­por­tu­nity to en­ter the hous­ing mar­ket, but crit­ics fear it may be hi­jacked by sec­ond-home buy­ers

Build­ing blocks: Ge­orge Os­borne has lis­tened to the in­dus­try

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