Help to Buy creates surge in new homes

princeofpounds

The only house building programme in the medium term, when looking at history to have delivered enough houses for the population was the council house building programme.

If you want supply (instead of hiding behind this facade of wanting extra supply but not wanting to see anything that actually could deliver it), you'd want to see council building.

That's largely because the councils themselves act as a great big fat block to anyone else who would like to build houses, even if they have plenty of financing.

Graham_Devon

princeofpounds wrote: »

That's largely because the councils themselves act as a great big fat block to anyone else who would like to build houses, even if they have plenty of financing.

Over 500,000 plots with planning permission. At least that's what I read in an article the other day.

Doesn't appear to be the council blocking planning which is the biggest issue here. The planning is granted.

princeofpounds

Over 500,000 plots with planning permission. At least that's what I read in an article the other day.

Doesn't appear to be the council blocking planning which is the biggest issue here. The planning is granted.

Oh, your read it in an article. That's ok then.


Seriously, if you spend any time involved in the construction business, you realise that a static statistic like that is not remotely informative.


A vast proportion of those approvals are outline planning permission, which doesn't actually let you build anything. So it often takes a minimum of two applications to actually get a project off the ground.


Then there are normally a whole number of reasons why it takes even more permissions to get a project going. For example, for a large development it is often necessary to submit even more applications than outline and full. Sometimes plans have to adjust to changes of circumstances during the process, whether physical constraints, new business partners or changes in financing.


Part of this is a game, whereby the council refuse an initial permission in order to claim they have done something to downsize a development, before the 'real' application is put in. And then sometimes developers push for a bit more again once building is underway and the NIMBYs see it as a lost cause.


And sometimes, developments don't materialise. They might be sought just to increase the value of a property, but not built by the incoming buyers. The developer might not be able to get financing for the units initially sought. The site might turn out not to suitable for commercial reasons - sometimes even the Section 106 'payments' required by the council as a condition of awarding the permission, or other conditionality that cannot be met.


It's actually quite rare that 1 approval = 1 house, let alone 1 application = 1 house. That's an assumption worthy of soviet planners.


The current government estimate for 'enough houses' is about 250k p.a., just to keep pace with demand, not to improve the situation.


Total approvals granted in Great Britain in the last five years are:


132k, 158k,192k, 220k, 200k (1H15 annualised).


i.e. not even treading water.


The increase is down to a concerted government drive to unblock the system, although the real damage is done in the applications that never appear due to obstructive policies, not the approval rate itself (because no-one wants to waste money on applications that will be refused).

chucknorris

Jon_B wrote: »

People seem to be under the illusion that HTB is a subsidy. It is not it is by definition a LOAN. Unless the HPC dream comes true it is a pretty safe bet.

It obviously is a subsidy, unless I have misunderstood how it works, isn't the loan interest free for 5 years? If so, that clearly is a financial aid which is given for free over that 5 year period.

I'm not saying that it is necessarily a bad thing, but it is a subsidy.

mwpt

wotsthat wrote: »

I presume your point is that increased credit can lead to increased prices but you've gone for the response above because you don't want to discuss whether it can also lead to increased supply.

My point was that the regulars are jumping all over an article that says HTB never increased prices (*), whereas in any other economic context except for the minefield of housing no one would be questioning that a significant increase in available credit would increase prices. I find this forum informative in many ways but downright absurd in others purely because everyone has such an emotional stake in the housing subject.

(*) No one cares to discuss the methodology used to come to this conclusion, they seem more than happy to accept it as a matter of faith because it suits the agenda.

Filo25

chucknorris wrote: »

It obviously is a subsidy, unless I have misunderstood how it works, isn't the loan interest free for 5 years? If so, that clearly is a financial aid which is given for free over that 5 year period.

I'm not saying that it is necessarily a bad thing, but it is a subsidy.

It is interest free over 5 years, however it is an equity loan, so if the property does go up in value the government will also participate in that increase when the property is sold, so if you are buying in a property hotspot with rapidly increasing prices, the real effective cost of the loan can be surprisingly high.

mwpt

Filo25 wrote: »

It is interest free over 5 years, however it is an equity loan, so if the property does go up in value the government will also participate in that increase when the property is sold, so if you are buying in a property hotspot with rapidly increasing prices, the real effective cost of the loan can be surprisingly high.

But that's only if you choose to sell right? How would the government arrive at a fair valuation of the property if you didn't sell, to determine the exact loan amount?

CLAPTON

mwpt wrote: »

But that's only if you choose to sell right? How would the government arrive at a fair valuation of the property if you didn't sell, to determine the exact loan amount?

they would use the district surveyor to value the property

wotsthat

mwpt wrote: »

My point was that the regulars are jumping all over an article that says HTB never increased prices (*), whereas in any other economic context except for the minefield of housing no one would be questioning that a significant increase in available credit would increase prices. I find this forum informative in many ways but downright absurd in others purely because everyone has such an emotional stake in the housing subject.

(*) No one cares to discuss the methodology used to come to this conclusion, they seem more than happy to accept it as a matter of faith because it suits the agenda.

If my economic credulity had been stretched to breaking point by the conclusion then I might have looked at the source research to find the obvious flaws in the methodology.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/499701/Evaluation_of_Help_to_Buy_Equity_Loan_FINAL.pdf

wotsthat

Filo25 wrote: »

It is interest free over 5 years, however it is an equity loan, so if the property does go up in value the government will also participate in that increase when the property is sold, so if you are buying in a property hotspot with rapidly increasing prices, the real effective cost of the loan can be surprisingly high.

It's still a subsidy because the taxpayer is paying the interest on your behalf; they're also sharing the risk that the asset price will fall.

I don't have a particular problem with this but would prefer the subsidy wasn't given nor the risk taken in the 57% of cases where the report determines HTB hasn't led to new supply.