As we know, the property market in London is notorious for sitting a long way outside the conventions of the wider UK system.
For many years – much like the comparison between the USA and the UK itself – it has been said that what happened in London usually permeated out to the regions at some point.
So, if London sneezed, historically at least, the rest of the UK was likely to catch the cold.
Now though, I’m increasingly inclined to think that – in property terms – London and most parts of the UK are not truly related at all.
Sure, the South East as a whole is still ‘part of the family’, but can we really see the ties between London and the North East, for instance?
Is it really the case that the vagaries of the prime London market will have any bearing on the local housing markets in Yorkshire, Nottinghamshire or Lancashire?
London is different, there’s no getting away from it, and what passes for a functioning housing market in the Capital would certainly not be the case in most other areas of the country.
And if London’s needs are different, then surely London requires its own schemes, incentives, and public policies to help it to become the place we would like it to be.
This is why Help to Buy London was recently launched as, while the overall Scheme is judged to have been a wild success, in the Capital the existing parameters just wouldn’t fit.
The equity loan available for HTB London has now been upped from 20% to 40% in acknowledgement that London pricing is significantly higher, and the maximum property value has also been increased to £600k.
So the principle looks sound, but we also have to acknowledge that to purchase property anywhere near that maximum amount, individual borrowers are going to need significant incomes, firstly in order to save for the 5% deposit required, and secondly in order to secure the mortgage – which could be 55% of the value.
Not forgetting, too, that the Government loan is only interest-free for five years, after which it will come with a fee of 1.75% of the loan’s value.
It’s perhaps not surprising then, that HTB London has come in for some criticism, with suggestions that it is unlikely to significantly increase the number of buyers who will be able to use it in order to purchase ‘affordable’ new-build homes.
After all, this scheme is only available for new-builds, and given the pricing restrictions across many parts of the Capital one suspects the scheme will only work in relatively small pockets where developments can be kept below the maximum value allowed. In terms of London prices this may be easier said than done.
That said, the initial figures suggest a significant early level of interest – in the first week alone 15,000 individuals were said to have registered their details and, if nothing else, this does prove a number of points.
Firstly, it shows that people still want to buy homes in London; secondly, that they are desperately in need of support to do this; thirdly, that without such Schemes there is little chance of large numbers of potential buyers ever getting to that point.
So, HTB London will certainly help, but what about those wanting to purchase away from the new-build market?
Well, unfortunately the Government incentives in this area are about to be phased out. Help to Buy 1 – also a new build scheme –has been extended until the end of the decade, but Help to Buy 2 – the mortgage guarantee offer to help existing homeowners, first-timers and those who are not looking at new-builds – will finish at the end of this year.
Even though it has been the catalyst for a strong increase in high LTV loan availability – the loans most used by first-time buyers – it is on its way out and there is no guarantee the lenders involved will want to continue offering low-deposit loans with the same volume or appetite when they are no longer tied into it.
My view is that we need both the new-build and the wider guarantee elements to allow first-timers in particular to make their step onto the ladder.
With the best will in the world – I think we are all aware of the housing start stats – there are only a certain number of new-builds available.
Opening the rest of the property market up – especially in London – for first-timers, second-steppers and the like is necessary to keep up the momentum.
To that end we are going to need some sort of handover when HTB2 ends with, I hope, lenders fully committed to maintaining the supply of high LTV loans, preferably through a private mortgage guarantee arrangement rather than via the State.
Overall, while Help to Buy London is a welcome addition, the delivering of ‘affordable housing’ across the Capital, and indeed, across the country, needs a joined-up approach.
It needs to recognise that new-build is absolutely vital but that many potential purchasers wish to buy existing flats and homes – HTB2 enabled individuals to do this, making it perhaps a somewhat premature end for a piece of the housing strategy puzzle which has much going for it.
The big question remains, what will take its place? Until we get a fuller idea of the answer to this we could well find ourselves taking a number of steps back.
*Rob Clifford is a Director of SDL Lettings, part of the SDL Group, formerly known as Shepherd Direct