The government’s Help to Buy scheme has fuelled the recent weakness in the UK’s housing market, according to the chief of one of the country’s largest housebuilders.
The scheme’s introduction in 2013 “brought forward price growth significantly”, said Pete Redfern, chief executive of Taylor Wimpey. It acted as “an accelerant” and helped prices hit a peak in many parts of the country, from which they were now flat or falling back.
“I think prices would still be growing today if Help to Buy hadn’t come in when it did,” added Mr Redfern in an interview with the Financial Times.
The scheme allows buyers to put down a deposit of as little as 5 per cent on a new-build home and receive an equity loan from the government to cover up to 40 per cent of the property’s value.
It came under increased scrutiny this week as a report published by the National Audit Office said almost two-thirds of people using the scheme could have purchased their properties without it. The spending watchdog said the scheme left the government exposed to “significant market risk”, with billions of pounds tied up in the housing market.
Since the introduction of Help to Buy, almost £12bn has been lent to buyers and 210,964 properties have been purchased through it, according to official figures. From 2021, it will only be available to first-time buyers, and will be phased out completely in 2023.
Mr Redfern estimated the scheme — which helps fund two-fifths of new-build purchases — had pushed up prices by between 4 and 5 per cent. The government has previously claimed it had “little direct effect on prices”.
“If you make it easier for people to buy something, you have an impact on pricing, unless that thing is unconstrained, which is clearly not true of housing,” said Mr Redfern.
Taylor Wimpey has reported a three-fold increase in pre-tax profit since the scheme was launched in 2013, but Mr Redfern said he was “by no means an unadulterated fan” of Help to Buy.
Mr Redfern has been chief executive of the FTSE 100 group for 13 years, having overseen a merger between George Wimpey and Taylor Woodrow in 2007.
He admitted the group struggled during the financial crisis, when its shares fell below 5p. “There were two or three points where you are thinking ‘I’m not quite sure we’re going to get through this’,” he said. Its share price has since recovered to £1.56.
The UK housebuilding sector has more recently been dragged into scandals around poor quality building, the mis-selling of leaseholds and executive pay.
“We should have stepped up our quality and customer service piece earlier than we did”, said Mr Redfern, who has recently launched a new strategy aimed at improving service.
He also admitted Taylor Wimpey “got it wrong” on leaseholds.
Between 2007 and 2011, the group sold a number of properties with onerous leasehold terms, including ground rents that doubled every 10 years. The terms effectively prevented homeowners from selling on or remortgaging.
On Tuesday, the Competition and Markets Authority, the UK’s competition watchdog, launched an investigation into the potential mis-selling of leases by developers and freeholders.
When the scandal emerged in 2017, Taylor Wimpey set aside £130m to assist customers in converting their lease terms to better terms. Just £25.5m of that had been paid out by the end of last year, according to the most up-to-date figures.