Financial ReporterIs the London market distorted by HTB cap?
The London housing market is being "badly distorted" by the £600,000 upper threshold of the Help To Buy Scheme which is pushing prices up for first-time buyers, according to estate agent James Pendleton.
It believes the market is "becoming clogged" with high numbers of new builds selling just below £600,000. More than four times as many new build homes were sold just below the threshold compared to just over it in the past year.
A total of 83% of new build homes sold between £575,000 and £625,000 in seven key areas achieved less than £600,000.
James Pendleton has warned that buyers often end up paying more for smaller properties that have been ‘priced up’ to meet increased demand, resulting in an inflated market.
A secondary effect 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, further distorting the market.
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.”
By Rozi Jones, 13th July 2017