The Great Help-to-Buy ripoff

“Building chiefs cash in on Help to Buy”

Bosses at Persimmon, Barratt and Bellway have been handed shares worth more than £12million.

Persimmon chief executive David Jenkinson exercised share options worth £10million under the housebuilder’s controversial bonus scheme, while two top Barratt executives received stock worth nearly £1million, and two Bellway bosses were handed performance-linked shares worth £1.6million.

The bonanza came just a day after Tony Pidgley, the founder and chairman of rival builder Berkeley, sold shares worth £42million.

His deal took the amount he has made from selling stock in the past two and half years to £166m.

Last night critics condemned the share awards, which came just a week after figures showed the rate of house building in the UK had hit a three-year low.

Developers such as Persimmon, Barratt and Bellway – but less so Berkeley – have also raked in record profits off the back of Help to Buy, a taxpayer-funded scheme that lends cash to buyers.

Reuben Young, a spokesman for housing campaign group Priced Out, said: ‘The scandal is these payouts are only made possible by Help to Buy, which has taken developer profits into the stratosphere by investing public money into rising house prices.’

Persimmon’s Jenkinson, 52, received 411,084 shares worth £9.7million at yesterday’s prices. After taxes he received 217,874 shares worth £5.2million and he is required to hold on to them for at last one year.

Barratt chief executive David Thomas received 64,182 shares worth £431,000 through a bonus plan and deputy chief Steven Boyes received 50,795 worth £341,000.

Bellway awarded 30,667 performance-linked shares worth about £1million to boss Jason Honeyman and 17,823 shares worth about £600,000 to finance chief Keith Adey.

The final amount of shares they receive will depend on whether they hit performance targets.

Meanwhile, Pidgley has sold shares in the past six months that have made him £79.2million.

That included 1m he sold in July for £37.2million and a further 1m on Tuesday for £42million, cashing in on his company’s rising share price.

The sales came after Pidgley previously sold a total of 2.5m shares for £86.8million in 2017 – taking the amount he has made since then to a staggering £166million.

The building firms declined to comment.

https://www.thisismoney.co.uk/money/markets/article-7585531/Building-chiefs-cash-Help-Buy.html

“First-time buyers using Help to Buy paying 10% more for homes than everyone else”

Catch 22: first-time buyers can buy only new properties; if they could get the discount on ANY property many would save at least 10% – and have none of the poor-quality build issues affecting new properties.

But developers won’t allow that!

“First-time buyers using the Help to Buy scheme in England are paying an average of 10% more than those buying a new home without Government support, figures suggest.

Those who purchased a new-build home in the past year using the scheme paid an average £303,450 each, significantly more than those who bought without Government help.

On average, the premium paid by those using the scheme was 10.3% in the 12 months to September 2019.

That’s according to a report on 41,500 new build properties, which also found huge price disparities between properties sold in London and the rest of the country. …”

https://www.mirror.co.uk/money/first-time-buyers-using-help-20536679

“Help to Buy is not helping housing crisis, warn MPs”

As they say: No sh*t Sherlock!

“A parliamentary committee has slammed the government’s £12 billion Help to Buy scheme for tying up vast sums of money in a policy that has mostly supported homebuyers who could already afford to buy a property while failing to boost the provision of affordable housing or reduce homelessness.

The public accounts committee found that three fifths of buyers who took part in the scheme did not need it to buy a home. It said that the “large sums of money tied up could have been spent in different ways to address a wider set of housing priorities and focus more on those most in need”.

The committee has called on the Ministry of Housing, Communities and Local Government to carry out a full evaluation of the scheme’s value and necessity before a new version of the policy is launched in 2021.

Shares in Britain’s biggest housebuilders, which sell a significant proportion of homes through the scheme, fell this morning on the report. Persimmon lost about 53p, or 2.5 per cent, to £20.48; Taylor Wimpey fell by 4p, or 2.4 per cent to 159p; Barratt Developments slipped 9¼p, or 1.4 per cent, to 641¾p.

Help to Buy was introduced in April 2013 in response to a fall in house sales following the financial crash of 2008, when a tightening of regulations around mortgage lending made it more difficult to buy a property. It was originally intended to run until 2015 but will now last for a decade.

The scheme offers buyers with a deposit of 5 per cent a five-year interest-free loan of up to 20 per cent of the purchase price, or 40 per cent in London. The loan must be repaid in full on the sale of the property, within 25 years, or in line with the buyer’s main mortgage if it extends beyond 25 years.

The current scheme, which runs until March 2021, is not means-tested and is open to first-time buyers and those who have previously owned a property. Buyers can purchase properties valued at up to £600,000. From March 2021, a new scheme which is due to run for two years, will be restricted to first-time buyers and will introduce lower regional caps on the maximum property value, while remaining at £600,000 in London.

Help to Buy has increased housing supply by an estimated 14 per cent. Since it launched, it has supported more than 220,000 home purchases. The government has issued loans with a total value of more than £12.4 billion.

However, the committee warned that the government has allowed the scheme to become a semi-permanent feature of the housing market without thinking through the changes needed to improve the value to be achieved from the scheme. There is also no plan in place to prevent a fall in supply when the scheme ends in 2023.

Research by the committee also found that should house prices fall or interest rates increase, the government could make a substantial loss on the scheme. It warned that homebuyers who have used Help to Buy might not be aware of the financial risks if interest rates change. It also found that buyers who wanted to sell their property soon after purchase might find that they were in negative equity as new-build properties typically cost 15 per cent to 20 per cent more than equivalent “second-hand properties”.

Meg Hillier, Labour MP and chairwoman of the committee, said that the scheme had “increased the supply of new homes and boosted the bottom line of housebuilders.” She added: “It does not help make homes more affordable nor address other pressing housing problems in the sector such as the planning system or homelessness”.

“The scheme exposes both the government and consumers to significant financial risks were house prices or interest rates to change. Better consumer protection needs to be built into similar schemes in the future.”

Source: Times (pay wall)

“Barratt Developments shares slide on gloomy outlook with end of lucrative ‘Help to Buy’ scheme that helped triple profit on each home feared”

“… as one eagle-eyed hack pointed out today, before the taxpayer-funded scheme, Barratt made £14,000 profit on each house it built. Now, after six years of Help to Buy, it makes more than £50,000 profit per house. …”

https://www.thisismoney.co.uk/money/markets/article-7426533/Barratt-shares-slide-investors-fear-end-lucrative-Help-Buy-scheme.html?ito=rss-flipboard

“Help-to-buy loans benefited more rich than poor households”

“… More than 5,500 households with an annual income of over £80,000 have been given help-to-buy loans in the past year compared with 4,142 households earning less than £30,000, the government’s own figures have revealed. Well over 2,000 of the richest households who were awarded taxpayer-funded loans, allowing them to buy new-build houses with only a small deposit, had incomes in excess of £100,000. …”

https://www.theguardian.com/society/2019/aug/31/help-to-buy-loans-benefited-more-rich-than-poor-households?CMP=Share_iOSApp_Other

Big developer CEOs offloading large blocks of their shares …

“Barratt Developments’ boss follows Berkeley founder’s lead and sells more than a third of his shares for £3.3m.

Barratt Developments’ boss has sold more than a third of his shares for £3.3 million.

David Thomas sold 500,000 shares for 660p each. He still has 823,000 Barratt shares worth £5.3 million.

The move came just weeks after Berkeley founder Tony Pidgley cut his stake in his company by a fifth – cashing in £37.2 million of shares.

The sales raise concerns that housing bosses believe the market has peaked.

And Taylor Wimpey warned rising costs and ‘flat’ house prices were putting pressure on its profits.

It reported first half sales of £1.7 billion, almost unchanged from the previous year, and said profits fell from £301 million to £299.8 million. The firm has proposed a 2019 dividend of 18.34p per share.”

https://www.dailymail.co.uk/money/markets/article-7306879/Barratt-Developments-boss-sells-shares-3-3m.html

“Young Britons believe dream of owning home is over, survey says”

“One of Britain’s biggest mortgage lenders has found that 70% of young people now believe that the homeownership dream is over for their generation.

Having carried out the largest-ever survey of potential first-time buyers, Santander said its own figures suggest less than 25% of 18- to 34-year-olds will be in a position to buy a home by the year 2026.

The Spanish-owned bank said that while 91% of the young people interviewed still aspire to own a home, over two-thirds said it was unlikely to happen unless they received the deposit from their parents. Back in 2006, around half of those under 34 were able to get on the property ladder, the bank said.

The study found that the sharpest fall in first-time buyer homeownership has been among those on middle-incomes – those earning between £20,000 and £30,000 this year. Of the new buyers who had been able to buy, two-thirds reported having household incomes of more than £40,000….”

https://www.theguardian.com/money/2019/jul/31/young-britons-believe-dream-of-owning-home-is-over-survey-says?CMP=Share_iOSApp_Other