Despite Nationwide’s latest House Price Index revealing a further “softening” in annual house price growth over the last month, the government’s Help-to-Buy scheme is nothing but booming.
According to the building society, there were around 48,000 Help-to-Buy (HTB) completions in England in the 12 months to March 2018, up 21% on the same period last year. The scheme accounted for approximately 8% of all house purchase mortgages in England over the period, with the vast majority of HTB loans made to first time buyers.
While it is unclear whether the initiative will be extended beyond its April 2021 closing date, it is undeniable that it has had a significant impact on house buyers across the country. However, despite the numbers illustrating clear demand for new build homes, the Bank of England’s latest Money and Credit figures revealed that the annual growth rate of lending to small and medium sized businesses continued to fall in July.
Though net bank lending to non-financial businesses increased £2.7 billion over the course of the month, this consisted of £3.1 billion of lending to large businesses but was offset by a £0.4 billion reduction in lending to SMEs. What’s more, the twelve-month growth rate of SME lending was -0.2% in July, a trend that has continued to take hold over the last four months of the year.
There is clearly an issue here and it doesn’t take a mathematician to work out that these numbers don’t quite add up.
Demand for new homes is strong – the popularity of the Help-to-Buy scheme in spite of uncertain market conditions is evidence of this. It was also interesting to see that this week Grosvenor, a major UK landowner, announced it plans to build 30,000 homes over the next five years. However, small and medium sized businesses are not receiving the support they need from traditional lenders to meet the national demand. Why should only big landowners and housebuilders be the ones to take advantage of the national appetite for new build homes?
With SME lending continuing to fall month-on-month the need for someone to step in and plug this gap is becoming increasingly vital. To me the answer is simple. The market needs an option B) which brings together real estate-focused investors with capital-starved SME house-builders. The UK need houses, we need to create jobs, and we need to support our diminishing SME house builder.
Creating this network will go some way towards redressing the supply-demand balance for housing investment. It is then, and only then, that we will be able to address the housing crisis in the UK – and maybe even do something about solving it.