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Help to Buy scheme seems doomed by a rigid planning system Help to Buy scheme seems doomed by a rigid planning system
(3 months later)
Taylor Wimpey's share price has risen by a fifth since the chancellor announced his Help to Buy scheme in March. No surprise there: investors in housebuilders know a good thing (for the companies) when they see it.Taylor Wimpey's share price has risen by a fifth since the chancellor announced his Help to Buy scheme in March. No surprise there: investors in housebuilders know a good thing (for the companies) when they see it.
Taylor Wimpey completed its first Help to Buy transaction five weeks after the scheme was launched in April and it has now passed 1,000 reservations. The firm is even sounding sufficiently bullish about house prices to predict a modest write-back of impairment charges taken in previous years. Yes, life for housebuilders is looking up.Taylor Wimpey completed its first Help to Buy transaction five weeks after the scheme was launched in April and it has now passed 1,000 reservations. The firm is even sounding sufficiently bullish about house prices to predict a modest write-back of impairment charges taken in previous years. Yes, life for housebuilders is looking up.
So, you might assume, a building boom is now in prospect. After all, fans of Help to Buy keep assuring us that, by stimulating demand for homes via government-subsidised mortgages, supply will surely follow.So, you might assume, a building boom is now in prospect. After all, fans of Help to Buy keep assuring us that, by stimulating demand for homes via government-subsidised mortgages, supply will surely follow.
No, it won't. Taylor Wimpey reckons it might build 10% more homes this year than last year. If that pattern is replicated across the industry, a grand total of about 115,000 new homes will be constructed this year. That is a far cry from the 200,000 a year that used to be deemed necessary to keep pace with underlying demand.No, it won't. Taylor Wimpey reckons it might build 10% more homes this year than last year. If that pattern is replicated across the industry, a grand total of about 115,000 new homes will be constructed this year. That is a far cry from the 200,000 a year that used to be deemed necessary to keep pace with underlying demand.
Are the housebuilders stalling by sitting on land? They say, reasonably convincingly, not. Taylor Wimpey, for example, says it is developing 99% of the plots where it has firm planning permission. The real culprit is said to be a rigid planning system that places an effective annual cap on construction at about 130,000 or 140,000 homes.Are the housebuilders stalling by sitting on land? They say, reasonably convincingly, not. Taylor Wimpey, for example, says it is developing 99% of the plots where it has firm planning permission. The real culprit is said to be a rigid planning system that places an effective annual cap on construction at about 130,000 or 140,000 homes.
George Osborne's Help to Buy scheme may accelerate the construction of, say, 25,000 new homes but it will do nothing to address the long-term housing crisis.George Osborne's Help to Buy scheme may accelerate the construction of, say, 25,000 new homes but it will do nothing to address the long-term housing crisis.
Indeed, without serious planning reform – and there's no sign of that – it will make matters worse by pushing prices even further beyond first-time buyers.Indeed, without serious planning reform – and there's no sign of that – it will make matters worse by pushing prices even further beyond first-time buyers.
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