"Help to Buy" scheme in the UK pushed up prices, but not supply

Brendan Burgess

From the FT
Buyers of overpriced UK homes left in the lurch

There were many aspects to George Osborne’s crowd-pleasing Budgets to dislike, but few promise do as much long-term damage as his Help to Buy, that impressive example of economic illiteracy.

In the face of a shortage of housing supply, the subsidy to buyers stimulated demand, pushing prices further up and creating an artificial two-tier market. An analysis this week from brokers Peel Hunt showed the baleful result, and quantified just how successful Help to Buy Builders Yachts has been.

In the years before the 2008 crisis, the sector made steady profits of about £2bn. The profits then disappeared, and did not regain that level until 2015. At that point, Mr Osborne’s big idea clicked in, and the profits took off. Houses financed by Help to Buy typically fetched a 5 per cent premium over the market price, which came straight through to the bottom line. In the past four years the sector has more than doubled profits, to more than £5bn a year, while building much the same number of houses as before the crisis.
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Frequent Poster
The UK builds about 200k dwellings a year. Average price of a new build is about £320k

Is a £25k profit per unit so unusual?


Frequent Poster
How could any help to buy scheme not push prices up - at least in the short term. More money chasing the same number of houses