Help to Buy ISAs quite the dumbest idea since help to buy. (HMT factsheet).
A 3k tax break to first time buyers,
First-time buyers who save in a help-to-buy Isa will have their savings boosted with a payment from the government when they decide to buy a property. The bonus will be equal to 25% of their savings, so for every £200 they save, the government will give them £50.
The maximum amount that can be put into the Isa and boosted is £12,000 – the government’s payment will top this up to £15,000.
The bonus is being offered for each person, not each house, so a couple will be able to get up to £6,000 towards their purchase.
As well as the government bonus, the Isas will also pay interest.
Stupid for three reasons
1) as a state subsidy it will immediately find its way onto the price of land, especially as it will take until 20176/2018 to be operative
2) House prices are likely to rise far more in this period. Shelter
We need to double the number of homes built a year to solve our housing shortage, and this is yet another example of government attempting to put a sticking plaster over a gaping wound.
Only measures that actually build more homes will make a material difference to all those priced out and struggling with sky high housing costs. Put in black and white, the money spent on this scheme could build almost 65,000 affordable homes.
Jonathan Samuels, chief executive of Dragonfly Property Finance
The irony of the Help-to-Buy ISA is that it may not help first-time buyers at all.
“Throwing £50 at first-time buyers for every £200 they save gets people into the savings habit, which is no bad thing.
“But if we’re not building more homes then it may well drive prices higher in the medium term as even more people compete for the same level of property.
“A first-time buyer might be able to put £15,000 rather than £12,000 down as a deposit, but if the property they want has risen even further in value due to the strength of demand, where has that got them?”
3) It will only make a difference to wealthy couples with wealthy parents who can currently afford deposits. What it does therefore is reduce the amount of equity release the older couples have to take out for their children, another case of intergenerational inequity, a prelection state funded bung to the wealthy baby boomer generation.
The issue of young people lacking savings for FTB is a real issue, but again lack of targetting means the scheme will not boost supply. A well designed scheme would be targetted in those areas only where supply is being boosted (e.g. Waterbeach), with housing releases restricted to eligible first time buyers only, with state funding capped to basic rate taxpayers only, and the cost of funding split evenly between social rented and intermediate housing assistance.