By Peter Hoskin
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2013-05-21 14.19.40

Strolling through Brixton a couple of weeks ago, it wasn’t
so much the new, half-finished block of flats that caught my eye as the way
those flats were being promoted. A sign had been pinned onto the boarding
outside, highlighting the bare facts of the Government’s new Help to Buy
scheme: “5% Buyer’s Deposit, 20% Government Loan, 75% Mortgage.” And then, underneath
that, the words “Don’t Miss Out”.

For those in No.11, it’s probably the happy housing
equivalent of those “Cheers
to the Chancellor” signs
appearing outside pubs to mark the fall in
beer duty: homebuyers can have one on George, and don’t you forget it when the
next election comes around. But, to my eyes, it’s all rather worrying. The
two-part Help to Buy scheme announced in the Budget – £3.5 billion’s worth of
government loans for people buying newly-built homes, and £12 billion’s worth
of underwriting for mortgages – contains plenty to fear.

The first terrifying possibility was raised by Mervyn King a few
days ago. He’s worried that the scheme, currently scheduled to last three years
from next January, could be extended into something bigger and more permanent.
As he put it, “this scheme is a little too close for comfort to a general
scheme to guarantee mortgages.” And if that were to come about, then taxpayers
would face a massive liability should everything go a little bit sub-prime. “We
do not want what the United States has, which is a government-guaranteed
mortgage market…”

But, even putting that dread possibility aside, there’s the
effect that Help to Buy could have on homebuyers themselves. While it may help
some people saunter on to the property ladder now, there’s a possibility that
it will block many more from doing so in future. After all, if demand for
properties is increased, then prices are sure to follow. That converted garage
in Camden could just go from half-a-mill’ to three-quarters-of-a- mill’ in five
years’ time. Great news for anyone who manages to squeeze into in now. Not so
great for people looking to buy then, who either won’t benefit from the same
government schemes or for whom the government schemes may prove insufficient.

As it happens, there are already signs that a new housing
bubble is being inflated, at least in parts of the country. A report
by Rightmove
, published yesterday, revealed that the average
house price in England and Wales is now £249,841. In Greater London it’s £509,870,
and has risen by 8.6 per cent over the past year. Little wonder why today’s inflation
show the headline rate – which doesn’t include house prices,
but which currently underpins the Bank of England’s policy decisions –
declining from 2.8 to 2.4 per cent, while the rate for house prices rose from
1.9 to 2.7 per cent. As the Independent’s Ben Chu suggests, it’s
a rum set-up.      

And, remember, what goes up sometimes comes down. Should the
housing market ever correct itself, then a lot of people stand to lose out. We
know this because it’s already happened, in limited form, since the financial
crisis. In six of ten regions of the UK, house prices have fallen
over the past five years
. In the North East, the average price has gone
from £127,900 in August 2007
to £99,295 now. For the
Government, more people taking on more debt may spell recovery. But for the
people themselves, it could just mean more debt.

Of course, from Burke through Thatcher and on to Cameron,
conservatives have tended to value property-ownership. But, with the market as
subverted as it is, it shouldn’t be regarded as an unalloyed good; and
particularly not when a government-sponsored borrowing binge is required to
bring it about. A more helpful solution – as, yes, Polly Toynbee suggests in her
today – would be to build more affordable housing. This may
not be as easy as underwriting mortgages, nor boost the assets (and secure the
votes) of the baby-boomers, nor create an illusion of prosperity, but that’s
precisely the point – bricks have more worth than bubbles.

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