Safe as houses? The Chancellor’s Help to Buy scheme is a quick fix of the wrong problem

Britain needs more houses not more buyers.

Share

Recent sharp rises in house prices have raised the spectre of another property bubble. But with the second, altogether riskier, phase of George Osborne’s buyer-support scheme only opening for business today, we ain’t seen nothing yet.

The impact of the first part of Help to Buy – under which those purchasing a newly built home can apply for a cheap loan of up to a fifth of its value – is already being felt. Combined with improving consumer confidence, low interest rates and government assistance for lenders, the scheme has helped jerk the housing market out of post-crisis torpor. Prices have now been on the up since March and September saw the fastest monthly rise in six years.

But it is too soon to talk of bubbles. Take London out of the calculations and an annual rise of 3.7 per cent drops back to a mere 0.8 per cent. Furthermore, by restricting assistance to buyers of new properties, Mr Osborne is – rightly – targeting the supply constraints behind ever-rising prices.

If the first stage of Help to Buy is defensible, however, the second – registration for which starts today – is not. From January, successful applicants will have a portion of their mortgage guaranteed for the first seven years. And this time the help is available to everyone. Cue soaring demand in a market where demand already outstrips supply by 150,000-plus homes annually; which means rocketing prices.

The Chancellor’s aim is obvious. Not only might a new cadre of grateful homeowners vote Tory in 2015; higher prices will render the property-owning class as a whole more kindly disposed towards Mr Osborne’s party. The problem is that the Chancellor is creating the illusion of recovery by giving the addict more drugs. Lacklustre prices are an unavoidable, even healthy, consequence of the debt-fuelled boom that went before. Nor is his latest concession convincing. It is fine for the Bank of England to be charged with ensuring that the market is not over-heating. But an annual review – and the first of them not until September – is insufficient.

The details that have leaked out ahead of the launch of Help to Buy II are a hint of good news. After all, it is no bad thing for the Treasury to stand to make a profit, given that the taxpayer will pick up the tab in the event of a default. It is also arguably welcome that first-time buyers using Help to Buy may face costs little different from those market rates. It can only be hoped that the more exposed may be thus deterred from over-extending themselves.

Such comfort is scant, though. The Chancellor is still approaching the issue back to front, politics ahead of economics. Britain needs more houses not more buyers. Mr Osborne’s Government should be tackling sclerotic planning rules; and Mr Osborne himself should be unblocking lending to the companies that will build rather than the individuals that will buy. Help to Buy is not just a quick fix; it is a quick fix of the wrong problem.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Recruitment Genius: Junior Web Designer - Client Liaison

£6 per hour: Recruitment Genius: This is an exciting opportunity to join a gro...

Recruitment Genius: Service Delivery Manager

Negotiable: Recruitment Genius: A Service Delivery Manager is required to join...

Recruitment Genius: Massage Therapist / Sports Therapist

£12000 - £24000 per annum: Recruitment Genius: A opportunity has arisen for a ...

Ashdown Group: Practice Accountant - Bournemouth - £38,000

£32000 - £38000 per annum: Ashdown Group: A successful accountancy practice in...

Day In a Page

Read Next
 

Errors & Omissions: A widow’s tale with an unexpected twist

John Rentoul
 

For all his faults, Russell Brand is utterly sincere, something politicians should emulate

Janet Street-Porter
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing