Fears raised over housing supply impact of Help to Buy closure

The end of the government’s Help to Buy equity loan product will see a drop in demand for homes and contribute to a drop in delivery, industry commentators have told Housing Today.

Analysts told Housing Today the government should consider extending the scheme or replacing it with some other form of investment in the house building sector in Thursday’s Autumn Statement, given the challenge currently facing the sector. 

Applications to buy a home in England through the scheme, which requires a buyer deposit of just 5%, ended on October 31, and all sales must have to be completed by the end of March next year. 

Help to Buy sales have dropped from around nearly 50% of total sales for some housebuilders in 2020 after stricter criteria were brought in from April last year, meaning it was only available to genuine first-time buyers. But it has still made up around a fifth of sales this year for a number of major developers, with Persimmon last week saying the product accounted for 20% of reservations since July. 

The National Federation of Builders (NFB) has been lobbying the government to extend the scheme. Rico Wojtulewicz, head of housing and planning policy at the NFB, said the umbrella body wanted the government “reform it in a way to ensure it supported certain criteria such as higher energy efficient housing, on smaller plot sizes of houses only, or to help specific people who struggle the most to borrow, such as families needing bigger homes or single people”.

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Lucian Cook, head of UK Residential Research at Savills, said housebuilders were facing “a time of great uncertainty” and with the “backdrop of planning” difficulties the equity scheme’s end “will contribute to a decline in housing delivery over the next 18 to 24 months.”  Savills has predicted a 10% fall in house prices in 2023, and last week the Construction Products Association forecast a 10% decline in housebuilding starts.

Brian Berry, chief executive of the Federation of Master Building, said: “The ending of the Help to Buy scheme could exacerbate an already troubled market.” He added: “Public money is tight, but the upcoming Autumn Statement is an opportunity for the Chancellor to commit to greater investment in local planning authorities, which would release small house builders stuck in the planning process and let them focus on what they do best, delivering high quality homes.”   

Tony Williams, chief executive of the consultancy firm Building Value, said: “[Build] volumes are going to fall significantly. There will be a significant fall in transactions and completions”. He suggested it would be a “good idea” for the government to “bring something else out” to replace Help to Buy. 

Neil Hudson, founder of Residential Analysts, said that the housebuilding sector was “facing a severe downturn”.  Housing market downturns would lead to a downturn in construction capacity, which “takes a long time to recover”, Hudson said. “My suspicion is housebuilders will be lobbying for a replacement,” he suggested.

Ross Smith, director at new build sales and marketing business SiteSales, said:  “Without the Help to Buy scheme, volumes will inevitably drop unless extended or a combination of the government and housebuilders collaborate to create alternative buying options to shared ownership, ensuring sales volumes remain high on private sale housing.”

According to government data Help to Buy has advance £23bn in loans since 2013, supporting the purchase of almost 370,000 houses worth almost £100bn.

The Home Builders Federation has not publicly lobbied for an extension to Help to Buy because the government has been previously so clear the scheme will definitely end. Neil Jefferson, MD of the HBF said: “Help to Buy has been the most successful government home ownership intervention in in history and handsomely delivered on all is pre-set objectives. 

“For the first time in decades there is now no Government scheme in place to support first-time buyers to purchase new homes at a time where political and economic instability has seen mortgage availability challenged.”

The comments come from an in depth piece on the impact on housebuilders of the end of Help to Buy, to be published on Housing Today later this week.