20th Mar 2014 13:37
LONDON (Alliance News) - UK housebuilders Thursday pledged to invest in new sites for homes, saying that Chancellor of the Exchequer George Osborne's extension of a key part of the Help to Buy scheme until 2020 had given them the certainty they needed.
Osborne said Wednesday in his budget statement that the first phase of the government's flagship mortgage-financing scheme will be extended by four years to 2020. That part of the scheme makes some buyers of newly built homes eligible for a 20% equity loan from the government on top of their 5% deposit.
UK house prices have been recovering strongly through 2013 and into 2014, particularly in London and the southeast of England, and Help to Buy has been cited as a key driver along with increased mortgage availability and improved consumer confidence. However, some economists have warned that the market may be rising too quickly and is in danger of becoming a new bubble, fueled by the Help to Buy scheme. The Bank of England has said this isn't yet the case and it is keeping a close eye on the market.
Critics of the scheme also say Help to Buy is doing little to encourage the increased housebuilding needed to alleviate a shortage of available supply, particularly in London and the southeast.
However, comments from Barratt Developments PLC and Crest Nicholson Holdings PLC comments suggest that the extension will in fact encourage home builders to invest in new sites.
Barratt Developments Thursday said it planned to increase the number of sites it is working on to 450 from the current level of 380, creating around 3,000 new jobs. It expects the number of staff employed on its sites, including subcontractors, to increase to 21,000 from 18,000 at the end of 2013.
This follows its drive to recruit around 1,100 apprentices, graduates and trainees over the next three years to improve its skills base.
Crest Nicholson, meanwhile, said: "The proposed extension of the Help to Buy scheme through to 2020 provides additional certainty for business planning in the medium term, supporting the investment in skills and capacity required to deliver an increasing number of new homes."
The house builder cited the scheme for helping to drive up its reservation rates, selling prices and forward sales in the last few months.
According to the Treasury, the first phase of the scheme is supporting 30% of new build sales. However, of the 14,823 completed sales to date, only 977 have been in London. Ten boroughs in the capital, including Kensington & Chelsea, Westminster and Richmond, have seen no deals at all.
Property firm Savills PLC said that rather than inflating a property bubble, Help to Buy is having the biggest impact in lower value markets.
According to Savillls analysis, the scheme supported 45% of new build sales in Cannock Chase in Staffordshire, followed by Derby and Gravesham where 42% and 40% of new build deals, respectively, were down to Help to Buy phase one.
Savills said the only London borough to see high levels of new build sales as a result of the scheme is Barking and Dagenham at 39% where prices are still 8% below their 2008 peak levels.
The second phase of the scheme, which started last Autumn and guarantees a portion of a buyer's mortgage of new and existing homes, has not been extended and will end on December 31, 2016.
Crest Nicholson shares were trading at 400.30 pence, up 2.30 pence or 0.6%, while Barratt shares were trading at 409.98 pence, down 14.82 pence or 3.5%.
Savills shares were trading at 640.00 pence Thursday afternoon, up 24.00 pence or 3.9%.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
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