Criteria restrictions see Help to Buy continue to decline

Posted on Tuesday, April 12, 2022

The impact of the Help to Buy scheme within the new-build sector has been in slow decline, despite Help to Buy transactions still accounting for a sizable proportion of homes delivered by the nation’s three biggest housebuilders, according to research from Unlatch.

Launched in 2013, Help to Buy has been helping home buyers onto the property ladder via the new-build sector with just a 5% deposit, with the first phase (2013-21) allowing any buyer to take advantage, while only first-time buyers qualify for the current version - the Help to Buy Equity Scheme.

But how has this additional restriction impacted the appetite and impact of Help to Buy?

Help to Buy market peak

Help to Buy property completions had been climbing steadily. In 2016, 38,411 Help to Buy property completions were registered in England, with this figure increasing consistently each year to a peak of 52,247 in 2019 - a 36% increase versus 2016. At the same time, the total value of Help to Buy equity loans also increased from £2.1bn in 2016 to £3.6bn in 2019, while the market value of these homes increased from £9.9bn a year (2016) to £15.8bn in 2019.

Decline of Help to Buy

However, since this peak, the volume of Help to Buy homes reaching the market, the market value of these homes and the value of loans being issued have been in decline. In 2020, completions dropped by -5%, while both the value of equity loans (-0.5%) and the total value of Help to Buy properties (-0.05%) both showed a marginal decline.

The latest estimates suggest that this decline has been far greater in 2021, with a further -10% drop in Help to Buy completions, while the value of loans issued has fallen by 9% and total market values of Help to Buy Homes is also down -12%.

Housebuilders and Help to Buy


Unlatch also looked at the prominence of Help to Buy when it comes to the nation’s three largest housebuilders - Barratt, Persimmon and Taylor Wimpey. As a collective, the number of Help to Buy homes delivered to market by these three housebuilders fell by -18% between 2019 and 2020.

However, the percentage of total completions that Help to Buy homes account for has actually increased, up from 38% in 2019 to 43% in 2020.

Lee Martin, Head of UK for Unlatch, says: “Help to Buy has been very influential since it launched, but with the second phase now in full swing, it’s only natural that the volume of Help to Buy homes built, and loans issued, will start to tail off.

This is due to a number of factors. For a start, the market segment of buyers who qualify to purchase these homes has been reduced to first-time buyers only. In addition, housebuilders are no doubt anticipating the end of the scheme's expiry in 2023 and managing their output accordingly.

"Many buyer profiles were no longer meeting the new criteria of being an FTB, hence divorcees and young second-time buyers, to name just a couple, were having to look at other avenues available such as Shared Ownership schemes, which is becoming more and more popular with far less of a stigma associated to this buying facilitator

"It’s fair to say that there’s also been a pandemic influence at play as well, with Covid causing a drop in property completions across the board between 2019 and 2020. But while this negative trend has very much reversed on the whole, it remains to be seen if Help to Buy completions will bounce back with the clock ticking down to the final deadline.

"That’s not to say that demand has evaporated and it’s clear that Help to Buy remains a key focus for the nation’s biggest housebuilders. In fact, the level of Help to Buy homes as a percentage of all completions has actually increased during the pandemic, accounting for 48% of output for the nation’s big three.

"When the scheme does end, it will leave a sizable hole in this respect, although this will no doubt be plugged by another government initiative focussed on fuelling buyer demand in order to keep market values buoyant.”

Via @PropertyReporter