Help To Buy Equity Loan And Newbuy Schemes – April To Sept 2013

[FreeTrader]

Headlines:

• In the first six months (to end September) there were 5,375 properties bought with the support of the Help to Buy: Equity Loan scheme.
  
• The total value of these equity loans was £208 million, with the value of the properties sold under the scheme totalling £1.04 billion.
  
• The average price of a property bought under the scheme was £194,167, with an average equity loan of £38,703.
  
• The majority of home purchases in the Help to Buy: Equity Loan scheme were made by First Time Buyers, accounting for 4,948 (92 per cent) of total purchases.
  
• For the NewBuy Guarantee scheme, 676 home purchases were made in Q3 2013. This brings the total number of house purchases up to 4,450 since the launch of the scheme in March 2012.
  

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/260034/HelptoBuy_and_NewBuy.pdf

Edited November 21, 2013 by FreeTrader

[TheCountOfNowhere]

The CML says £143B was lent in 2012, so taking that as typical for a year then these schemes amount to supporting 1% of total lending.

I maintain the FLS is the thing that has pushed up prices ( a bit ) this year.

Still low volumes. Still high prices.

What we have here is death throws of a credit bubble

[FreeTrader]

Q3 House Building stats for England were also released this morning:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/259891/House_Building_Release_-_Sept_Qtr_2013.pdf

[FreeTrader]

HMRC has released latest property transactions statistics this morning.

Seasonally adjusted transactions totalled 94,950 in October. This is still well below the peak levels seen in 2006/07, but those times were something of an exception.

It's hard to say what is a 'normal' level of transactions. For most of the 1990s transactions were running at around 100K/110K per month. Adjusting for the increase in housing stock, we might expect 120K/125K per month today for an equivalent level in my opinion.

http://www.hmrc.gov.uk/statistics/transactions.htm

[Unsafe As Houses]

Many thanks FreeTrader

Observations:

Minor Typo Table 1 Notes:

‘Completion of legacy FirstBuy transactions that occurred after 1 April 2013 are not included in these statistics…’

Should that not be ‘before’?

Table 2: Purchase Price:

From the original paper:

‘The median purchase price for all purchases in the scheme was £176,995. The mean purchase price was slightly higher at £194,167. ‘

Table 4 (in original paper):

'73.2 per cent total completions were by purchasers with up to 5 per cent'. So most wouldn't have been able to secure a mortgage without HTB.

Table 5 Total Applicant Household Income

Applicants’ income is rather low 73.3% (3,938/5,375) of applicant have a household income <=50k.

Would be interesting to see this table broken down by single applicants/ couple applicants and age.

From the original paper:

‘Purchasers must have proof of income to be eligible for a Help to Buy Equity Loan’

Map 1: Location of Sales

This is extremely interesting. HTB completions are concentrated in certain areas of the country mostly in densely populated areas of Northern England and Birmingham. There are very, very few completions in Greater London.

Would be interesting to see an equivalent map for HTB applications.

Edited November 21, 2013 by Unsafe As Houses

[FreeTrader]

While on the subject of property transactions, the CML has posted an article today on volume trends:

http://www.cml.org.uk/cml/publications/newsandviews/150/585

Notably they say (my emphasis):

The number of loans taken out by people moving home declined by more than half from more than 650,000 in 2007 to 315,000 in 2009. However, unlike some other groups of buyers, there has been virtually no recovery in the number of mortgage-funded transactions by movers since that low point. This year, for example, movers are expected to take out only around 325,000 mortgages. That compares with an average of more than 700,000 a year in the (admittedly buoyant) decade preceding the market downturn.

[...]

There are probably a number of reasons why mortgage-funded purchases by movers have so far shown negligible signs of recovery. Buyers in this group often rely on the growth of equity in their existing home to finance their next purchase. In 2008 and 2009, however, house prices fell significantly, and since then they have only risen modestly.

The combination of falling real incomes and the erosion of equity – and the impact of transaction costs – has made it difficult for many in this group to bridge the gap on a scale sufficiently large enough for them to make the next "step up" in the property market.

[Ash4781]

Thanks.

Ok so the CML want something to go in the Autumn statement to help the 'ladder'? the 'ladder' doesn't exist?

[TheCountOfNowhere]

Thanks.

Ok so the CML want something to go in the Autumn statement to help the 'ladder'? the 'ladder' doesn't exist?

It most certainly is a ladder:

Remind you of anything ?

[FreeTrader]

Thanks.

Ok so the CML want something to go in the Autumn statement to help the 'ladder'? the 'ladder' doesn't exist?

Many of the current group of FTBs are making exactly the same mistake as their predecessors a few years ago. The question then becomes: Who will buy the homes of the downsizers if we have a generation stuck in their first property?

Under normal circumstances we might expect to see increasing 'band compression" (for want of a better term) as larger, more desirable homes soften in price due to lack of demand and prices of smaller homes rise due to FTBs and downsizers competing for the same stock.

However the prevailing attitude of 'I'm not giving it away' and 'I'm not selling for less than it's worth' may lead to a decline in volume instead in the upper tiers. Therefore the compression may be partially reflected in lower rental rates for larger properties as time goes on.

This is just idle speculation on my part though – trying to call trends in the housing market is pretty futile IMO because there are too many variables in play.

[Democorruptcy]

Many of the current group of FTBs are making exactly the same mistake as their predecessors a few years ago. The question then becomes: Who will buy the homes of the downsizers if we have a generation stuck in their first property?

Under normal circumstances we might expect to see increasing 'band compression" (for want of a better term) as larger, more desirable homes soften in price due to lack of demand and prices of smaller homes rise due to FTBs and downsizers competing for the same stock.

However the prevailing attitude of 'I'm not giving it away' and 'I'm not selling for less than it's worth' may lead to a decline in volume instead in the upper tiers. Therefore the compression may be partially reflected in lower rental rates for larger properties as time goes on.

This is just idle speculation on my part though – trying to call trends in the housing market is pretty futile IMO because there are too many variables in play.

Those larger homes become low hanging fruit for the financial sector? With pension annuities trashed and low interest rates, more older owners will turn to equity release i.e. debt. The financial sector have to prise that equity out of their hands, so it cannot be passed onto their children, who could clear their debts with an inheritance. Debt from working age to grave.

Re rentals I know of one large house for sale at £575,000 or rent at £1,000 a month. 2%

[Bland Unsight]

Headlines:

[*] In the first six months (to end September) there were 5,375 properties bought with the support of the Help to Buy: Equity Loan scheme.

...

(snip)

Stupendous stuff - as ever! Thanks for posting.

[The Knimbies who say No]

So there ought to be about 10,000 more sales in the pipeline if the number of HTB applications is representative of future sales. I know it takes time to complete but I am surprised by how few sales there have been. Perhaps my stated suspicion about a lack of application refusals is wrong.

[FreeTrader]

So there ought to be about 10,000 more sales in the pipeline if the number of HTB applications is representative of future sales. I know it takes time to complete but I am surprised by how few sales there have been. Perhaps my stated suspicion about a lack of application refusals is wrong.

The numbers do seem low, but maybe there will be a substantial pickup in Q4.

Recent statements from interim reports of major builders:

Persimmon Homes 6/11/2013:

"The introduction of the Government sponsored Help to Buy equity loan scheme in April 2013, which is only available to buyers of newly built homes, has proved particularly attractive. We have now sold over 3,000 homes under this scheme. "

Barratt Developments 13/11/2013:

"The Government’s Help to Buy shared equity scheme continues to provide strong support to the market and has accelerated the recovery in consumer demand for new homes. Since the scheme’s launch, over 2,800 of our reservations (excluding JVs) have utilised the Help to Buy shared equity product."

Taylor Wimpey 14/11/2013:

"Help to Buy continues to prove popular amongst our customers across the country. To date, we have worked with 2,403 households to reserve homes, with a further 207 currently going through the qualification process with their Home Buy Agents."

[FreeTrader]

Savills released a UK housing market report yesterday. It includes this chart:

[crashmonitor]

5000 sales courtesy of HTB.....50,000 sales courtesy of fear of HTB's inflationary effects..

[zugzwang]

So there ought to be about 10,000 more sales in the pipeline if the number of HTB applications is representative of future sales. I know it takes time to complete but I am surprised by how few sales there have been. Perhaps my stated suspicion about a lack of application refusals is wrong.

Is it too early to claim that HTB has failed? FTB interest has revived a bit but it looks like cash buyers are the driving force behind the market here as in the US.

Forget talk of China, Wall Street banksters cashing out their QE chips on both sides of the Atlantic is the most obvious explanation.

[The Knimbies who say No]

Is it too early to claim that HTB has failed? FTB interest has revived a bit but it looks like cash buyers are the driving force behind the market here as in the US.

Forget talk of China, Wall Street banksters cashing out their QE chips on both sides of the Atlantic is the most obvious explanation.

snip

Hard to say, the reservation figures for HTB1 make for some interesting reading, but there is a bit of guesswork involved as to precise numbers on particular dates.

Here's reservation numbers(from press releases) versus completions(from FreeTrader's tables on this thread), which shows a gap but the completions rate seems to be approximately matching the reservation rates. It's worth watching just because it seems odd for a three month completion to be the norm so I wonder if all reservations ultimately turn into purchases (the govt press release says this is the case ). The dip in completions over the summer(green line in lower graphs, numbers from FreeTrader's linked tables) also makes me wonder whether all reservations turned into sales, but it could easily be that people chose not to move home in the holiday period(since HTB could easily have been created after holidays plans were already in place).

Here's the HTB1 reservation/completion daily rates, based on press releases to date:

You'll note the drop in late October which was spectacularly reversed recently, albeit this is influenced by fact the rates quoted are lower limits eg the early November press release said 'over 15,000 reservations' so I used 15,000 as the input which depressed the day rate over the period, but without knowing the exact number there was little else to be done. It could be nothing more than an artefact of rounding numbers, but I wonder whether the second part of Help to Buy has pushed more buyers into HTB1. I only speculate as the confusion regarding the HTB-mortgage guarantee has been widespread- is it plausible that some potential buyers expect an equity loan deal under HTB2, and when they find out it doesn't work that way decide to look at new build instead in order to get the deal they wanted? May be far fetched.

If the data point in early November is a not a good representation of the true number of reservations at the time, and instead the day rates were calculated to the next point instead, you find that HTB1 rates are dipping:

But, this relies on the speculation about HTB2 feeding HTB1 to be wide of the mark, in the main. I think. [Also, canning inconvenient data is generally not a good practice, but given the huge swing in rates implied by the released figures, and that at the end of the day this is not a robust piece of analysis, it seems not unreasonable to suggest that there may be more to it than first meets the eye.]

The next couple of updates should be interesting to sort this out.

Edited November 23, 2013 by The B.L.T.

[FreeTrader]

Hard to say, the reservation figures for HTB1 make for some interesting reading, but there is a bit of guesswork involved as to precise numbers on particular dates.

Here's reservation numbers(from press releases) versus completions(from FreeTrader's tables on this thread), which shows a gap but the completions rate seems to be approximately matching the reservation rates. It's worth watching just because it seems odd for a three month completion to be the norm so I wonder if all reservations ultimately turn into purchases (the govt press release says this is the case ). The dip in completions over the summer(green line in lower graphs, numbers from FreeTrader's linked tables) also makes me wonder whether all reservations turned into sales, but it could easily be that people chose not to move home in the holiday period(since HTB could easily have been created after holidays plans were already in place).

[snip]

The next couple of updates should be interesting to sort this out.

Thanks for posting, B.L.T.

Your idea that publicity re HTB2 has resulted in a sharp uptake in HTB1 is quite plausible IMO.

I suppose we shouldn't be too surprised at the initial sluggish response as advertising and other systems had to be put in place. As you say, the next couple of updates should be more insightful.

At the time of the HTB announcement the Government said it expected to support 74,000 home buyers over the three years of the equity loan scheme. £3.5bn / 74,000 = average loan of £47,300. So far the average has been £38,700 and if it stays that way then roughly 90,000 buyers will be signing up if the £3.5bn allocation is fully utilised.