29th Apr 2014 15:41
LONDON (Alliance News) - The UK government's flagship mortgage-financing scheme Help to Buy is hampering institutional investors efforts to enter the residential property market, according to industry experts.
Edward Crockett, director, residential fund management at Aberdeen Asset Management said the residential property offers institutional investors an attractive return, but the scheme has now made it harder for them to play a part.
?It [Help to buy] is a doubled edged sword from an institutional investor's point of view because it has made it more difficult for us to come and be the cavalry and ride in and say 'we can fund that development for you' and it is making it more expensive for us to come into the market which is obviously not great?, Crockett said at the Estate Gazette's annual residential summit Tuesday.
?Talking about the long term point, we look at this as a series of numbers. You want to get in when it's low, achieve an income return and then get out when it's higher. It's not much more complicated than that and if you are paying too much to get in you can't get into the market, so that's the difficulty,? he added.
The first part of the scheme, which is now a year old, makes buyers of newly built homes eligible for a 20% equity loan from the UK government on top of their 5% deposit. It has been extended by four years to 2020. The second phase, which has not been extended, started in the Autumn last year and guarantees a portion of a buyer's mortgage of new and existing homes.
Help to Buy has given a welcome boost to housebuilders, which have reported an accelerating recovery in the UK housing market through 2013 and into 2014, particularly in London and the south east. The builders virtually halted new building in the wake of the financial crisis as banks pulled mortgage financing and the ensuing economic crisis put off house buyers. The companies instead focused on paying down debt.
?There's been talk of Help to Buy pushing up house prices which I think is true in some respect but equally I think it has got developments started that otherwise wouldn't have been built,? Gary Patrick, regional sales director, Barratt London, part of Barratt Developments PLC said.
?So from a Barratt Group perspective just under half of our current sales are through the Help to Buy model. For London for us, that is half that volume, just around 20%, for a number of reasons,? he added.
Crockett, however, said investors should not be put off by the UK's residential property sector as it could pay off long term.
?We see residential from all aspects of the risk sphere, so from strategic land all the way through to already tenanted student let apartments, its a huge opportunity. The residential sector is bigger than the total capitalisation of the stock exchange," he said.
?Its an enormous opportunity whether you are talking about the private rented sector, whether you are talking about strategic land, it offers all types of risk return rewards and if we manage to get it right there would be no reason why we should invest in commercial property because there is enough opportunity within the residential sector,? Crockett added.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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