There are clear signs of recovery in the property market. The Royal Institution of Chartered Surveyors (RICS) has recently reported that new house-buyer inquiries were at their highest level for more than three years.
It would appear that the catalyst for this demand can be traced back to March/April of this year and the launch of Help to Buy.
Arguably, the housing market was likely to start improving anyway, in line with greater confidence in the economy, but clearly Help to Buy has accelerated the process.
If it was George Osborne’s plan to stoke a pre-election house-price boom, then the scheme is timely. In fact, Nationwide Building Society has showed all 13 UK regions have experienced annual house-price growth in the third quarter, with the average property rising in price by five per cent per year.
Briefly, the Help to Buy scheme provides an interest-free loan of 20 per cent of the purchase price of a newly-built property for five years and is funded by taxpayers.
Buyers still need a five per cent deposit, but this additional loan enables them to buy a property they couldn’t otherwise afford.
The buyers’ mortgage provider grants a mortgage on the remaining 75 per cent of the value.
After five years, the home owner has to pay interest on the outstanding 20 per cent at a reduced rate.
However, despite the improvements in the housing market, RICS has also reported that housing market activity remains at historically low levels.
There are currently thought to be about 100,000 vendors entering the UK market monthly and this is less than half of what it was at the peak of the last housing boom in 2007. This would suggest that we are some way away from the next boom.
This is perhaps why the second phase of Help to Buy has been launched some four months before it was scheduled.
The scheme is similar but now extends to all houses rather than just new-builds.
In addition to stimulating demand and pushing up prices, the scheme would appear to be having a major impact on house-building. Last month, it was reported that house-building activity rose at its fastest pace since November 2003 and it is anticipated that house-building could increase by more than 30 per cent by 2015.
The builders are building, house buyers are buying and the property market is clawing its way out of a recession that knocked ten years of price growth off the average UK home outside of London.
Market Thoughts column by Alasdair Dunne. Mr Dunne is a partner at Fisher German in Market Harborough.
For more information about Fisher German see its website at, www.fishergerman.co.uk.