“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

“Berlin buys 670 flats on Karl-Marx-Allee from private owner”

THAT’S how you do it NOT “Help Developers to Make Obscene Profits” aka Help to Buy!

“The state of Berlin has bought back 670 apartments on the historic Karl-Marx-Allee from a private owner after decades of property privatisation in the German capital.

A 1950s prestige project for socialist East Germany, the grand boulevard that stretches from the city centre to Friedrichshain in the east has been the frontline of a months-long fight over gentrification and rising property prices.

The struggle erupted last November when the property management firm Predac announced its intention to offload 700 apartments on the road to Berlin’s largest property company, Deutsche Wohnen.

Fearing rent increases, tenants organised protest marches and hung banners from their apartments, eventually pushing the city senate to block the sale.

After months of legal wrangling, the senate confirmed on Monday that three blocs containing more than 670 apartments would instead be purchased by the state-owned housing provider Gewobag.

While the price of the sale was not confirmed by either side, the move to renationalise the buildings on Karl-Marx-Allee is likely to come at a steep cost, with estimates ranging between €90m-€100m (£80m-£90m).

Berlin’s mayor said the move was indicative of a wider strategy to reacquire housing stock sold to private investors in the 1990s, following rapid rises in rental costs in the city in recent years.

“Berliners should be able to continue to afford living in the city,” said Michael Müller. “That is why it was and continues to be our intention to buy up apartments wherever we can, so that Berlin can regain control of its property market.”

https://www.theguardian.com/world/2019/jul/16/berlin-buys-670-flats-on-karl-marx-allee-from-private-owner?CMP=Share_iOSApp_Other

Times: “Persimmon faults are exposed on TV”

“Pressure is about to return to Persimmon, with a television investigation set to reveal more concerns about the quality of its properties and customer service.

Britain’s New Build Scandal, to be aired tonight on Channel 4 as part of its Dispatches series, will feature an inspection of a new Persimmon home that found 295 faults, 70 per cent of which were so serious that they violated building regulations, including a fire door that did not close, leaking sinks, unsealed showers and faulty waste connections.

Britain’s most profitable housebuilder is responsible for one in seven homes sold via the government-backed Help to Buy mortgage scheme and in February became the first to report an annual profit of more than £1 billion. Based in York and a member of the FTSE 100 index of leading shares, it was embroiled in a pay scandal last year when Jeff Fairburn, 53, chief executive at that time, was awarded £81.6 million under a long-term incentive scheme put together in 2012 and linked to dividends and the share price.

Persimmon apologised to the customers featured in the programme, including two whose home was uninhabitable for three months after buying it. “We fully accept that on too many occasions in the past we have fallen short on customer care and we can and will do better,” it said.

Last month The Times revealed Persimmon had removed complaints about the standard of its homes from Facebook after taking over the administration of a group targeting customers on the social media site.”

Source: Times, pay wall