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The Future Of Help To Buy In Scotland

The Future Of Help To Buy In Scotland

The recent announcement that the Scottish Government’s Help to Buy Scheme has allocated its £140M budget only three months into the current funding year was a surprise. However, it does prove beyond any doubt that the scheme is very popular and that there is high level of demand for new homes. Already, more than 2,000 homes have been bought through Help to Buy in Scotland, with the same number likely to be completed this funding year.

Help to Buy has been incredibly well received.  Along with other Government led stimuli to get the housebuilding sector going after a very lean period, it is widely acknowledged as being a ‘game changer’.  It is seen as a key contributor to a turnaround in what had been a dismal market.

When Nicola Sturgeon announced a further injection of funding into the scheme at the Homes for Scotland annual lunch in May, she got the biggest cheer of the day. The scheme has helped many people, who were excluded from the market by constraints on mortgage availability, to buy new homes up to the £400K sale price threshold. It has also helped to create a general buzz and a feel good factor in the market, which in turn has helped boost confidence.

This newfound confidence, coupled with improved economic conditions, has allowed businesses to plan with more certainty for the future. This confidence can also make the difference when considering whether to accept risks in developing new products and services. At Burness Paull we have noticed a big upturn in demand for sites, competition between housebuilders and the resulting surge in plot sales.

Suppliers are also sharing in the upturn.  A brick shortage was reported in the press recently - a good problem for brick suppliers to have. Difficulties in recruiting local tradespeople have underlined the fact that the demand for skilled labour has shot up. These are all symptoms of a rapidly improving market but will the absence of further funding for the next seven months for Help to Buy have an impact on this positivity? Or has the spark that Help to Buy and other initiatives have created lit a fire that can’t be dampened?

Certainly, businesses don’t like uncertainty or peaks and troughs in demand.  The suddenness of the announcement that the funding for the remainder of the year has gone has caused some to pause for thought and ask questions.

What can be done to help support longer-term growth? Should Help to Buy focus solely on first time buyers now? Should the £400K upper limit be reduced?  The Government has said that it is “actively considering how further demand can be supported in this financial year...”  But what does this mean?

£100M is available in the next financial year – could there be more cash? How much of the 2015/16 funding is being used up now for completions scheduled that funding year? Could the Government give us regular updates on the level of 2015/16 funding available? Will the scheme carry on past 31 March 2016? All are relevant questions and the house building sector is keen to hear the answers.

The one certainty is that Scotland is still building too few houses. So, on the face of it, the demand must be there. The industry estimates that we need more than 21,000 new houses a year, but last year we only built 15,000.  This is more than in previous years and it is clear that Help to Buy has helped as a much needed catalyst for recovery. The challenge will be to fill the void it leaves when the scheme ends and to address the continuing demand for new homes.

The Scottish housebuilding sector is celebrated annually at the Homes for Scotland Lunch & Awards. Burness Paull enjoys a close relationship with the housebuilding industry, and so it is with great pleasure that we have committed to sponsoring the event for a further two years. We look forward to seeing many of you at next year’s lunch which will take place on Friday 15 May 2015.

Scott Peterkin
Partner

LChalmers