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Monday, June 23, 2014

Will there be an end to the Help-to-Buy program in the London property market?

London Help-to-Buy program
The London property market differs substantially from the rest of the U.K.
By Andrew Reilly

Given the need to help as many people find their way onto the property market in the UK, there have been a number of steps provided by the UK Government. One of the most successful actions undertaken by the government to assist people in finding a property has been the Help to Buy scheme. This has greatly assisted in helping people make their way on to the property market in a tough climate. However, in one of the many ways that many people recognise the London property market is different from the rest of the UK’s property market, there are complaints that the Help to Buy scheme is not of benefit in London.

This has led to a number of high profile people suggesting that the Help to Buy market should be closed off in London. One person who has stated this opinion recently is former chancellor, and father of TV cook Nigella, Lord Lawson. Lawson has called for this assistance to be closed off in the London market and he suggests that it could be done by lowering the assistance threshold to £300,000.  What is notable about this suggestion from Lawson is that it makes him the second Tory Chancellor to have gone public about his concerns.

The same opinion was voiced by Lord Lamont, with both former chancellors suggesting that this scheme was encouraging people to take on too much debt in their pursuit of property. This is a fine line that has to be traversed and there is no doubt that the assistance on offer does create a situation where some people are likely to experience problems in later years in trying to manage their mortgage. With two former Tory chancellors making their opinion on this well known, there is a growing level of pressure being placed on the policy that was introduced by George Osborne.

Lawson has been quick to point out that he is not against the scheme in principal and that around the country it actually serves a very strong purpose. However, with the London property market being quite a different creature to the rest of the property market to the UK, he believes that there is no need to see the system being in place in the overheated property market of London. With the current threshold for the Help to Buy scheme standing at £600,000 it is easy to see that many potential London property purchases can be bought under this scheme.

Help should always be provided for property buyers

The former Chancellor was quoted as saying “there is practically nothing in London which is under £300,000 but it would still be a benefit in the north”. The reference to the North is perhaps a sign of the disdain the former Chancellor feels for areas outside of London and while he makes an interesting point, to say that the housing market in London doesn’t need boosted is wide of the mark and perhaps missing the point.

There are clear problems with the London property market and while removing the Help to Buy scheme for certain buyers may minimise the financial problems that some potential buyers get themselves into, it doesn’t do much to solve the problem. There is a need to increase the supply of properties in London and this is an area that there needs to be clear direction and action.

A former Chancellor would understand the way that the market works and the relationship between supply and demand is one of the most integral elements of the economy. If there is a desire to lower the prices of the property market in the English capital, there is a need to ensure that there is a greater level of supply of properties in London. This would be a better focus for Lawson and people of a similar stature to focus on as opposed to removing the opportunity to buy. 

Lowering demand may bring about a change in the market, but it is not a tactic that will be of benefit in the long run to the London market. With high-class areas in London experiencing strong growth in house prices and areas like Islington, Lambeth and Southwark experiencing growth as well, there is a trend across the whole of the capital that is not being matched elsewhere. Providing specific tactics and strategies for London is important, but there is a need to make the right decisions.

About the author: Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 8 years but has been writing for as long as he can care to remember. When Andrew isn't sat behind a laptop or researching a story, he will be found watching a gig or a game of football.

Image license: Stephen McKay, CC BY-SA 2.0
"Old Street Roundabout"