By Jan Crosby, KPMG’s Head of Housebuilding
The Budget announcement on ‘Help to Buy’ is a potentially game changing policy for the sector. By broadening support to second and third time buyers, many of whom are equity constrained, it will create additional demand for new build properties.
This additional demand is likely to facilitate some growth in new build transaction volumes, but is also likely to have an inflationary effect — both positive for housebuilders.
The new policy also reflects a change of emphasis towards delivering additional funding support to encourage housing transactions rather than attempting to improve affordability through increased supply of land and new housing volumes.
However, it remains to be seen whether the new policy will help to address the issue of affordability. Most UK housing transactions are being made in the second hand home market and that’s where prices are being set. It will be difficult to address this issue through policy changes aimed primarily at a small segment of the market — in this case the ‘new built home market’.
Given much of the nation’s wealth is tied up in housing and those not on the housing ladder still want to get on it, this pragmatically helps people get what they want — more ability to move house or buy a house and some house price inflation as a by-product. That might actually create a feel good factor that acts as a multiplier in terms of broader consumer spending. It does not however fix the affordability issue and potentially creates a further reliance for ongoing support to the sector.
As always the devil is in the detail and at the moment it is unclear precisely how the scheme will be administered. Key will be to ensure to strike a balance between simplicity and delivering the policy objectives.