With the UK now officially out of recession and large house price increases seen over the last 12 months , things seem to have really turned a corner. In particular the governments Help to Buy Scheme has really made a difference with demand for new homes in particular benefiting from the incentive. This in turn has lead to increases in demand for skilled labour to work on larger projects. So we thought we would take a closer look at predictions for the future and the scheme itself.
Where is the growth going to come from?
Private housing is expected to grow by 15% by the end of 2014. This signifies an end to the worst recession seen in the UK for 35 years. This is a welcome boost to the construction industry which is currently valued at £111 billion. By 2017, the Construction Products Associations is anticipating growth of 19%. This growth will be achieved through focusing on major policies such as the Help To Buy scheme along with other capital investments which will focus on repairs and renewals.
More about the help to buy scheme
There are two components to the help to buy scheme.
The Help to Buy Equity Loan enables people to buy a newly-built home with a deposit of at least 5% of the property price, while the government offers a loan of up to 20%. The rest is covered by a mortgage.
Meanwhile, the Mortgage Guarantee offers mortgage lenders the option to purchase a guarantee on mortgages where a borrower has a deposit of between 5% and 20%. Because of this support, participating lenders are able to offer more mortgage products to borrowers with small deposits.
How the help to buy scheme can help
As the name suggests, the help to buy scheme helps individuals to get on the property ladder who might otherwise be held back by financial restraints such as a lack of deposit or a latent sellers market. The scheme, which is for people who want to purchase a brand new property is designed to assist people to up size or get on the property ladder. This in turn creates more demand in the construction industry for private housing.
A gov.uk press release published on the 29th May 2014 reports that 27,861 people have brought a new home through the help to buy scheme. The Help to Buy scheme is opening up home ownership to 1000's of people who would otherwise not be able to buy a new property and is part of Governmental plans designed to reward hard working people build a better future.
Although the figure makes up less than 3% of overall home ownership, the scheme has demonstrated how to successfully target people who need a hand to get on the property ladder.
Is help to buy boosting trade?
The private housing sector is seeing rapid growth which, back in October 2013, was forecast by Construction Products Association as lasting for 18 months with concern cited uncertainty when the Help to Buy policy was due to end. This is because without such policies in place the housing market would not be able to self sustain itself.
However, there was great news in May 2014 when the Government announced that the Help to Buy scheme was to be extended until March 2020 meaning that the scheme will now support the building of 200,000 new homes.
The construction industry output has been forecast to grow 4.6% in 2015. With the Help to Buy scheme off to a strong start and more Governmental commitment to support both the construction industry and home buyers, it will be interesting to see how this commitment will affect the growth forecasts of the construction industry in the coming months.
Will the scheme be closed early?
The biggest question on everyone's lips is will the Government pull the plug early? Recent house price rises have increased fears that a housing bubble is building. It has been suggested that help to buy may be responsible and that the Government needs to halt the scheme to adjust the market. However the Bank of England has recently hinted that interest rate rises could happen within the next 12 months and it appears that this in itself will cool the market with no need to pull the plug on help to buy early.
At the end of the day growth in the housing sector should not just be about house prices but should be about more houses. As long as the scheme continues then this will continue to encourage more buyers of new homes and help generate more work and job opportunities for all kinds of tradesmen.