Every Investor – HTB Threshold Storing Trouble For First Timers


It has been revealed after research that the property market is becoming clogged with high numbers of new builds selling just below £600,000. What the Government thought it had ended has now moved from ‘slab tax’ to progressive Stamp Duty, a problem creates the same uneven distribution of homes. It is said by experts that the phenomenon actually pushes prices up for prospective homeowners as wealthier buyers swoop to squeeze the most value out of Help To Buy.

Research by James Pendleton, independent estate agent, warns today that The London housing market is being badly distorted by the arbitrary £600,000 upper threshold of the Help To Buy Scheme which is pushing prices up for first-time buyers.

Four times as many new build homes were sold just below the threshold compared to just over it the past year, a study of seven London development hotspots shows*.

A total of 83% of new build homes sold between £575,000 and £625,000 in seven key areas achieved less than £600,000 is shown in detailed analysis by James Pendleton.

So that buyers don’t need raise as much of a deposit to buy a new build home, the government lends up to 20% of the purchase price (and 40% in London) through the Help to Buy equity loan scheme. However this only applies to properties worth up to £600,000, creating a vacuum in properties selling between £600,000 and £625,000 – and storing up problems for the future, also which James Pendleton’s experts warn is squeezing the market.

The study shows 380 properties across the £575,000 to £600,000 price bracket were sold in Battersea, Putney, Tooting, Balham, Wandsworth, Clapham and Brixton in the last year, compared with just 183 properties sold in the £600,000 to £625,000 bracket.

Homes eligible for Help to Buy, included 563 homes in total, 184 new builds and were sold at just under the threshold (£575,000 to £600,000) while only 38 new builds achieved between between £600,000 and £625,000.

Pendleton’s experts pointed out the irony of how the scheme was designed to help first time buyers, that is now potentially harming their interests. The London plan places minimum limits on the size of homes developers can build, and this leads to developers building relatively well-sized properties under this £600,000 price level.

Whilst this favours buyers over developers, it also means buyers with smaller budgets are squeezed by those with bigger budgets keen to take advantage of the Help To Buy scheme, meaning that buyers can easily end up paying more for smaller properties that have been ‘priced up’ to meet this increased demand. This will result is an inflated market.

Further distorting the market is that sellers of homes that are not new builds and are not eligible for Help To Buy nevertheless come under pressure to reduce their prices to compete, which is a secondary effect. James Pendleton says the same phenomenon was caused by the ‘slab tax’ Stamp Duty levels before George Osborne moved the country onto a progressive system while Chancellor.

Dividing a fiercely popular price point in London is the £600,000 threshold, where the maximum loan from the Government is 40% instead of 20%. However the upper limit of £600,000 is the same everywhere.

Even though the average London property is now £482,779**, the average price of flats in some areas is already far in excess of that. The average flat currently on sale is priced at £764,932 In Wandsworth, including Putney, Clapham, Battersea and Balham, while in Lambeth, home to up-and-coming Streatham and Brixton, it is currently £1.2million***.

Lucy Pendleton, Co-Founder Director of James Pendleton estate agents, said:

“Artificially high demand in this price zone just beneath £600,000 will be forcing many to pay over the odds.

“By introducing a Help to Buy threshold and axing Stamp Duty slab tax, the Government has simply replaced one disruptive line in the sand with another.

“These hurdles placed at arbitrary price levels have always had a distorting effect on the market and that’s what we are seeing now, smack bang in the middle of the cost of many one and two-bed flats for young professionals, which is a crucial price point for first time buyers in these areas.

“This may cause problems when these new builds are sold on, as they will no longer be available under Help To Buy and sellers won’t benefit from the extra demand the scheme generates.”

*Source: Rightmove (data collated 20/06/17).

**Source: Land Registry April 2017.

*** Source: Home.co.uk 21/06/17).