Will the Help to Buy Scheme provoke a healthier property market with more supply?

You have to give full marks to the government for making a valiant attempt to help first time buyers get on the property ladder and there is no question that, although it may be a limited scheme, in principal it is correct and should be encouraged.

Will it create a property boom?  Certainly not since the scale is too small in comparison with the market itself.

Will it percolate upwards through the various price divisions so that every one benefits in a modest way?  Yes, I would argue.

Will it produce the supply of much needed new homes? Certainly not since there are other forces at work.

It’s not rocket science; London is desperately short of new homes.  We build 20% or less of the properties we need and this figure is dwindling. What can we do about it? Well, for a kick off we need to cleanse the planning process of politics.  It’s awash in the stuff.  Councillors who sit on the planning committees are more concerned about their votes at the next local election than they are with granting planning consent for schemes and if you are a councillor who wants to look after the local community best to say no to any audacious scheme and you will be a hero.

Planning officers make their decision to either support of deny a scheme purely on the planning and architectural merits of a scheme not in order to win votes.  Politics should not enter into this process and yet it does and this is the big reason why developers groan when they have to go through this arduous process.

Next, the funding.  When you hear the expression banks are starting to lend again your ‘knee jerk’ reflex should be on what terms?  Technically you could get funding for most things but if the funding is at an uncommercial rate who in their right minds would agree to it?

Banks are having a ‘field day’ where they are lending and bolstering their balance sheets.  On the record the bank interest rate is 0.5% but when you apply the margins and the fees (both in and out of a deal) you get to something approaching 7-8%  – this is senior debt.  Where mezzanine finance is concerned you may as well ask Mr Disney to create some figures. They are off the Richter scale.  The profit then comes in the lending not in the developing.

This is where the government must get involved in some way or another in order to break this grid lock since if the developers are building it will increase supply in both private and affordable homes and, before you know it, you have a much more liquid and buoyant market.