Help to Buy unlikely to spur new house building
THE PRICE of housing is being driven upward by the government’s Help to Buy policy, but may not stimulate new building, according to ratings agency Fitch.
Though the intention of the scheme is to get more people a place on the housing ladder, Fitch expects that chancellor George Osborne’s mortgage guarantees will mostly push up property prices. The group also suggested that it would increase profit margins for developers, while increasing the government’s liabilities.
Halifax also recorded a 4.6 per cent increase in house prices in the three months to July, when compared to the same months in 2012. The last time prices grew at the same pace was in the three months to August 2010.
In July alone, prices increased by 0.9 per cent from June, the sixth month in a row during which an increase has been recorded.
Fitch’s warnings about a muted increase in the supply of houses were echoed by the Halifax, which noted that the recent increase in sales was not matched by the number of unsold properties, which has fallen in the past year.
Martin Ellis, a housing economist for the Halifax, commented on the rise: “Official schemes, such as the Funding for Lending Scheme and the Help to Buy equity loan scheme, may also be raising demand”.
He added: “House prices are expected to continue to rise gradually through this year with only modest economic growth and still falling real earnings constraining housing demand and activity”.
On top of declining real incomes, Fitch noted that despite an expected rise in prices, builders may not be primed to increase construction.
“For house builders the main benefit from the second phase of the scheme will come from rising house prices, rather than increased volumes,” it said.