The UK government has brought forward the so-called Help to Buy scheme which allows first-time buyers in the UK to secure a 95% mortgage due to the fact that part of the arrangement will be guaranteed by the UK government. This second phase of the original Help to Buy scheme was due to go live on 1 January 2014 and there is much speculation as to why the government has brought forward this program.
Perhaps it is a coincidence that the move was announced on the eve of the Conservative party conference in Manchester or are we just being cynical?
Is property becoming a political football?
Whether or not you agree, the timing of this movie is certainly suspicious especially when you bear in mind the political headway the Labour party made at its conference last week. The party announced a number of radical policies which may never see the light of day but certainly caught the attention of voters up and down the UK. We have a property grab, utility price freeze and an array of other ideas which are at odds with the Conservative way of governing.
Quote from PropertyForum.com : “Despite the fact that the vast majority of property investment in the UK is occurring in and around London, a major hedge fund has announced plans to snap up cheap properties in the North of England.”
There is no doubt that the Conservative party was taken aback by the very positive comments from last week’s Labour Party conference. We have yet to see any opinion polls to take into account last week’s announcements but we can safely assume that the Labour Party will be up in the majority of forthcoming opinion polls.
Is this really all about politics?
Prior to this move the UK government handed the Bank of England a more hands-on role in the policing of the UK property market. Indeed this second phase of the Help to Buy scheme will be very closely monitored by the Bank of England with concerns, both within the coalition government and outside, that it could potentially feed a house price bubble.
While it is dangerous to suggest that any political party would look to meddle in such an important area as property purely for political gain, there is a need to introduce a feelgood factor ahead of the election in 2015. One of the best ways to create a feelgood factor is to have a fluid and a buoyant property market which generally assists with household finances although once the Help to Buy scheme has ended, first-time buyers will probably be left high and dry, again.
Recovering from a very low base
If we take the London property market out of the equation there is no doubt that property prices around the rest of the UK are nowhere near their high prior to the 2008 US mortgage crisis. So David Cameron’s comment that the market was “recovering from a very low base” is factually correct and is perhaps a reminder that not all areas of the UK are back to historic highs.
It will be interesting to see how the introduction of Help to Buy part two impacts property prices across the UK and indeed whether a large number of first-time buyers will take up this very attractive opportunity.