House price growth putting homes out of reach of first time buyers
The number of locations in England where first time buyers using the Government’s flagship Help to Buy scheme can afford to get on the housing ladder is falling due to house price growth.
A new Help to Buy Isa savings product was launched last year with the aim of helping even more first time buyers onto the housing market but since then prices have risen, taking a new home out of reach of many more buyers, new research shows.
Help to Buy has a threshold of £250,000 and £450,000 in London. When the Isa was launched for first time buyers in December of last year there were 101 out of 326 districts in England where average prices exceeded the threshold with 17 in London and 84 in the rest of England.
But an analysis by online estate agent eMoov shows that in the eight months since the launch in December 2015 to July 2016 another two borough in London are now beyond the threshold and another 26 in the rest of the country.
The analysis also found that in Scotland and Wales the average house prices across the entirety of both countries remains within the Help to Buy threshold of £250,000 and should continue to do so until at least March 2017.
Of the areas which are no longer in the threshold, two in particular have seen double digit price growth since December of last year, with prices increasing by over £25,000 in just eight months.
Stevenage has seen the largest jump with prices up by 12%, bringing the average house price from £243,988 to £272,777, with property values in St Edmundsbury increasing by 10%, bringing the average house price up to £270,364 from £245,167.
Over the same period, two London boroughs also became ineligible for the Help to Buy scheme, where the threshold peaks at £450,000. Tower Hamlets saw prices rise by 5% or £24,360 to an average of £468,484. In Harrow prices increased by 4% to take the average house price to £451,643.
As well as highlighting the areas that have since exceeded the threshold, eMoov took the percentage value increase for each area between December and July and applied it to the current average house price.
Assuming a similar rate of price growth eMoov has calculated that a further 21 districts across England could break the Help to Buy thresholds, five of which are London boroughs, with each becoming beyond the grasp of the country’s struggling aspirational home owners by March 2017.
This would mean that the average house price in 150 district areas or 46% would price Help to Buy buyers out of the market by March 2017.
‘Historically Help to Buy has been of little help to the nation’s aspiring home owners and it’s plain to see why when you look at the numbers. The current pace of price growth across the market in England means that it will soon become irrelevant to the average buyer across nearly half of the country,’ said Russell Quirk, chief executive officer of eMoov.
He pointed out that the figures suggest that by March of next year, for those looking for a home in London, just nine of the capital’s 32 boroughs will be a viable option.
‘Across England there are still plenty of areas available below £250,000 however, if you do need help to get on the ladder but would prefer to choose where you live rather than have it dictated by the government, the only option is to look further north or across borders to Wales and Scotland,’ Quirk added.