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: Finance Assistant

£28000 - £30000 per annum: Recruitment Genius: A fantastic opening has arisen ...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: An exciting opportunity has ari...

Ashdown Group: Part-time Payroll Officer - Yorkshire - Professional Services

£25000 per annum: Ashdown Group: A successful professional services firm is lo...

Recruitment Genius: Inside Sales Manager

Negotiable: Recruitment Genius: Join a worldwide leader in data-driven marketi...

Day In a Page

Read Next
 

The majority of sex workers enjoy their job - why should we find that surprising?

Alex Bryce
A 'match' on Tinder  

Tinder may have inadvertently hit its self-destruct button by charging older users more

Nash Riggins
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn