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Foundations For The Future

Foundations For The Future

The announcement yesterday by Housing Minister Margaret Burgess that more than 5,000 families and first time buyers have purchased their home through the Help to Buy (Scotland) Scheme is welcome news.

This statement underlines the fact that the scheme has been hugely popular and that there is a high level of demand for new homes.  Mrs Burgess has also announced that there are a further 2,500 sales anticipated to be completed this year through this scheme and the Help to Buy (Scotland) Small Developer’s scheme.

Last year Nicola Sturgeon announced a further injection of funding into the scheme at the Homes for Scotland Annual Lunch in May, but the industry hoped there would be more on offer. The scheme is now in its last financial year and due to end on 31 March 2016. Will this Friday’s Homes for Scotland Lunch provide the public platform for a further announcement from the Housing Minister of additional funding, or even a continuation of the scheme?  Certainly those in the house building industry would welcome such news with open arms.  The scheme has proved to be a significant catalyst for a marked improvement in the house building market – the phrase “game-changer” is rightly used.

The current funding year has £130M (including £30M for small developers) allocated to it.  There is concern in the industry that the majority of this funding has now been allocated and concerns that the funding might run out soon if no additional funding can be provided.  Philip Hogg, Chief Executive of Homes for Scotland, was quoted as saying that “whilst buyers in the rest of Britain can take advantage of an extended and fully funded scheme to meet the demand that exists, those in Scotland are faced with the prospect that funds for the final round of 2015/16 investment could again become exhausted early due to a high demand”.  Whispers have been heard that Help to Buy funding in Scotland was going to run out at some point early this month.  The Scottish Government has denied this, but the impression amongst lenders is that whilst funding is being used up daily, they believe that funding may only be available until the start of the summer (albeit that is not that far away).

The Housing Minister has stated that “housing is, and will remain, at the heart of the Government’s ambitions to deliver a fair and more prosperous country”.  At Burness Paull we have certainly seen the benefits of that policy working for many of our house builder clients. There is no doubt that affordable home ownership has been put within the grasp of many first time buyers as a result.

So far there has been no statement that the scheme will continue after 31 March 2016.  What alternatives might there be?  Given the Government’s stance on housing policy generally it seems unlikely that they will simply leave a void.  But were that to happen, is the funding market now in such a position that it can sustain the level of demand amongst, particularly, first time buyers without Government support?

Now that Help to Buy has been tailored for homes up to a maximum value of £250,000 (reduced from the original £400,000 limit) will the Government’s support become entirely concentrated on the more affordable end of the market?  Certainly that seems to be the case with more funding announced in March for the Open Market Shared Equity Scheme for first time buyers.

Government support aside, one of the fundamental issues of our housing market is that we are simply not building enough homes to meet the demand, with significant shortfalls in supply.

This brings into sharp focus issues such as the planning process, provision and cost of infrastructure.  The City Deal model appears to be a well conceived idea but will require excellent execution to deliver the results needed to support the property development industry. The principles underlying the City Deal model are simple – up-front public funding is provided from the UK Treasury/Scottish Government to local authorities to support the costs of delivering major infrastructure projects, where it can be demonstrated that the projected tax revenues associated with the increased private sector economic activity generated by that new infrastructure will more than repay that up-front investment.  This should support new housing development and open up developments that have not been possible because of the previous cost barrier to development of big ticket infrastructure items.

‘Foundations of the Future’ is the theme at tomorrow’s Homes for Scotland lunch - which we are proud to be the lead sponsor of. Here’s hoping that Margaret Burgess uses the opportunity to build on the solid foundations that have been created in our industry.

Scott Peterkin
Partner

LChalmers