Help to buy help or hindrance in London
Wednesday, October 02, 2013 by Ed Mead
Help To Buy. As an estate agent surely I should welcome it, but having had a fair few column inches and air time to mull it over I’ve been a bit down on it given its potential effect in London but welcoming it outside. Early reservations included the cap at £600k which seemed a bit random and politically inspired.
In London the usual 7/8 year property cycle has been well and truly buggered with the usual x,y axes on the graph needing a 3D z axis as safe haven seekers, both English and foreigners in hordes, have caused it to spin off in a hitherto uncharted direction.
Outside London real prices falls well in excess of 25% in real terms over the last 5/6 years are now slowly bottoming out. Many have argued that HTB, not to be confused with Holy Trinity Brompton – a somewhat evangelical alternative to usual church going for those in central London – will cause a bubble, but I’m not so sure given the mortgages offered, despite being at 95%, are still subject to status. Hearing only State sponsored banks will be participating it’s got a distinct Fanny Mae/Freddie Mac feel and if other banks are nervous about a 20% buffer – customer 5% deposit and 15% guarantee from HMG – and seriously think their mortgages are at risk it says to me they’re far more nervous about their own balance sheets than the UK housing market.
As for London HTB is a right pain. Press speculation about a bubble means an already brittle market is going to find its carapace stretched even thinner as misinformed, often by agents, sellers prefer to wait for a higher price next year ignoring the fact that the majority of property on the market is at a price most buyers are cocking a snook at anyway. Most of our action is happening, in the centre of London, where a price reduction is agreed. An unseemly scramble often follows showing buyers are there, the last thing we actually need is more. HTB is hardly addressing the correct side of the equation, at least for us in London; supply.