Calls for ministers to pull Help to Buy out of booming London

The controversial Help to Buy mortgage scheme should either be totally abandoned or scaled back in London.

The calls have come independently from buy-to-let specialist Assetz, and from website Home.co.uk.

Both say that support for the housing market in London is simply not needed and could prove damaging. Assetz believes that the South-East should also be excluded from Help to Buy.

Doug Shephard, director of Home.co.uk, said: “Policy makers need to treat London separately to the rest of the UK.”

He said that London “clearly needs no extra stimulus and is running too hot already”.

If the Government does go ahead with its plans, Assetz says that Help to Buy will simply drive up demand, but not supply, meaning that house prices will continue to surge.  

This month, the Office of National Statistics showed that annually, house prices rose 8.1% in London. However, across the UK outside London and the South-East, prices went up by only 1%.

Stuart Law, CEO of Assetz, said: “What commentators should be pointing toward is the easing off of support for London house prices by abandoning Help to Buy in London and the South-East.

“The Government also needs to ensure the acceleration of construction in these regions through encouraging more aggressive planning policy in the South.”

Shephard said: “The strong property market recovery, post-crisis, evident in London and the South-East, has not been mirrored in other regions. House prices across the North are still below their 2008 levels and markets remain lacklustre.

“Moreover, the gap is widening and this trend is effectively centralising the bulk of the UK’s property wealth in London and the South,East.

“A huge surge in London property prices is well under way and shows no signs of slowing down. The average asking price for a property within Greater London now stands at £389,025, a rise of 6.8% in the last six months alone.

“Such growth and further relentless demand all point towards an overheating market. Despite this, the UK government and Bank of England are continuing their support for mortgage lending and loose monetary policies.

“Property prices in London are higher than ever before and the market in the capital bears little resemblance to the rest of the country. Property in the surrounding South-East has performed reasonably well, yet the price differential is still dwarfed by London’s super-premium pricing.”

He added: “Only time will tell if the market will overheat and naturally realign prices in the process. However, the concern is that, if the capital’s property bubble does burst, it may well shake the confidence of the wider market.”

The first phase of Help to Buy was launched in April and takes the form of a shared equity scheme, available to purchasers with just 5% deposits on new-build homes only.

The second phase is due to launch in January and will be available to purchasers with the same small deposits on both new and existing housing stock. It will take the form of a mortgage indemnity, to encourage lenders to lend 95% mortgages.