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Help to Buy has caused house prices to surge for first-time buyers

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First-time buyers in and around London have seen some of the biggest jumps in average house prices since the Help to Buy schemes were introduced from 2013, research from estate agency Springbok Properties has found.

Springbok Properties looked at the average cost of a first-time buyer property across the UK and where has seen the largest uplift in price growth since Help to Buy was introduced.

While Help to Buy has given many a leg up when it comes to climbing the property ladder, the influx of additional demand has also, perhaps ironically, pushed the cost of Help to Buy homes up considerably.

Across Great Britain, the average cost of a first-time buyer property has increased by 32.8% since 2013, almost on par with the regular market.

The typical price first-time buyers paid for a property in Barking and Dagenham was £281,396 in 2019, an alarming 70.8% increase from 2013.

This isn’t the only East London region to see huge increases the average first-time buyer price, as they rose by 60.7% in Newham to £349,874 and 60.1% in Havering to £307,874.

Other areas to see a strong uplift are Waltham Forest in North East London, rising by 68.7% to £408,233; Thurrock in Essex, increasing by 59.2% to £237,635; and Stevenage in Hertfordshire, rising by 58.7% to £250,086.

Scotland and the North East more subdued

The City of Aberdeen, which has been hit hard by falling oil prices in the past few years, is the only area of the UK where first-time buyers are paying less than in 2013. The price they paid has fallen by -10.9% to £126,794 in 2019.

Some other areas of Scotland have only seen modest rises, as Inverclyde prices have risen by just 6.55% to £83,995, while South Ayrshire prices have seen a 6.9% uplift to £102,992.

In England, the worst climber is County Durham in the North East, where prices rose by 3.5% to £88,790. This is followed by Redcar and Cleveland, where prices climbed by 4.5% to £105,156; while behind that is Middlesbrough with an increase of 5.0% to £110,304.

It seems Help to Buy hasn’t been enough to kick-start some of these markets into action.

Founder and CEO of Springbok Properties, Shepherd Ncube commented:

“Help to Buy was introduced by the previous government with good intentions – to assist would-be home-buyers in their first step onto the property ladder.

However, it seems that whilst around 200,000 buyers have indeed been supported, the unintended consequence in most areas has seen an above average hike in prices driven by the demand that Help to Buy has created.

First rung homes are supposed to be more affordable, but we’ve seen the average price paid by a first-time buyer accelerate to similar levels as the wider market. Not only has this made it more difficult for today’s aspirational homeowner, but perhaps some tax-payers might question the wisdom of using their money to fuel house prices even further?”

About Help to Buy

Help to Buy is characterised by three schemes.

The Help to Buy Equity Loan was launched in 2013 and has buyers contribute a 5% deposit towards a new build, with the government providing a 20% equity loan on the property, or 40% within London, which is interest-free for the first five years.

This is available on new builds under £600,000 in England and £300,000 in Wales. The scheme is running until 2023, though after 2021 it will only be available for first-time buyers and there will be caps on the value of homes people can buy.

This is the most well-known of the Help to Buy schemes.

The second scheme is the Help to Buy Mortgage Guarantee, which also launched in 2013. This had the government act as guarantors against loans, while it wasn’t restricted to new build. It was discontinued at the end of 2016.

The Help to Buy ISA was launched in 2015, which saw savers pay money into an ISA and then get a cash bonus form the government.  The scheme closed for new entrants in November 2019, while the bonus must be claimed by 2030.

First-time buyer average house price – Largest increases – (2013 – 2019)
Average FTB house price 2013 Average FTB house price 2019 Average FTB % change / growth (2013-2019)  
£164,791 £281,396 70.8%  
£242,021 £408,233 68.7%  
£217,777 £349,919 60.7%  
£192,331 £307,874 60.1%  
£149,239 £237,635 59.2%  
£157,609 £250,086 58.7%  
£191,496 £302,769 58.1%  
£132,616 £209,073 57.7%  
£125,923 £197,912 57.2%  
£213,833 £334,473 56.4%  
       
£152,826 £206,018 34.8%  
£111,080 £139,436 25.5%  
£101,872 £122,148 19.9%  
£145,436 £193,194 32.8%  
       
First-time buyer average house price – Lowest increases (2013 – 2019)
Average FTB house price 2013 Average FTB house price 2019 Average FTB % change / growth (2013-2019)  
£142,288 £126,794 -10.9%  
£85,764 £88,790 3.5%  
£100,603 £105,156 4.5%  
£90,389 £94,774 4.9%  
£78,833 £83,995 6.5%  
£96,331 £102,992 6.9%  
£84,690 £90,765 7.2%  
£96,794 £104,262 7.7%  
£101,009 £109,147 8.1%  
£102,465 £110,824 8.2%  
       
£152,826 £206,018 34.8%  
£111,080 £139,436 25.5%  
£101,872 £122,148 19.9%  
£145,436 £193,194 32.8%  

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Property

Cost of maintaining a buy-to-let hits £12k a year in parts of the UK

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Leading property management platform, Howsy, has looked at the cost of maintaining a buy-to-let property each year and how this varies across the UK.  

Buy-to-let can be a tricky business if you don’t tackle it properly and there are a whole host of costs that can trip up the amateur investor. From the more obvious additional three percent stamp duty tax, to various other tax implications, void periods, mortgage costs, agency fees, the cost of finding a tenant, and more, Howsy’s previous research shows the average buy-to-let brings an annual return of just £2,000.

With the Government’s continued attack on UK landlords, making the most out of your investment financially can be tough and even when you consider all financial commitments for a property, many can still be caught unaware by out of the blue maintenance and repair costs. 

Buy-to-let landlords should squirrel away savings in anticipation of these events and an industry rule of thumb is an annual budget equivalent to 1% of your property’s value. 

So what does that equate to?  

Across the UK landlords should be tucking away an annual budget of £2,344 to cover repairs and maintenance, with this rising to £4,746 in London, with the North East home to the lowest repair costs at just £1,328. 

Of course, markets with higher rent returns may seem promising from an investment standpoint but the higher the reward, the higher the cost when things do go wrong. In Kensington and Chelsea, this annual 1% saving climbs to an eye-watering £12,292, hitting nearly £9,000 in both the Cities of London and Westminster.  

Outside of London, South Bucks and Elmbridge are home to the most expensive buy-to-let maintenance costs at £6,091 and £6,019 respectively.

Head to the likes of Burnley or Blaenau Gwent however, and this yearly maintenance budget drops to less than £1,000 a year.

Founder and CEO of Howsy, Calum Brannan, commented: 

“The buy-to-let sector can be a minefield for the amateur investor and now more than ever, it’s imperative that you do everything you can to maximise the return on your investment.

While technology now allows a greater level of control and service when managing your investment at a lower cost via online platforms, it isn’t just about the financial side of things. Providing a fit for purpose property is not only a legal requirement but essential to ensure a happy tenancy and a reduction in void periods.

Of course, things can go wrong and having the budget available to fix them is a must. In the worst-case scenarios, a cash pot equal to one percent of your property’s value might not be sufficient, but it should cover you for most eventualities and is a good benchmark to start on.

As with all buy-to-let investments, good preparation, organisation, and education are key, and whether you go it alone or have a great management agent if you stay on top of things, a bricks and mortar investment is still one of the best you can make.” 

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