HOUSING is set to rise up the agenda in Scotland over the coming months after the launch of a new proposal aimed at first-time buyers.
Scottish Labour last week said it would provide more support for would-be buyers saving for a deposit, claiming that current plans do too little to help young Scots get on the housing ladder.
But help for first-time buyers will ultimately backfire unless it’s matched by efforts to boost the supply of affordable housing in Scotland, experts warn.
Three-quarters of Scots aged between 20 and 45 and who don’t currently own their own home believe they’ll never be able to get onto the property ladder, according to recent research by the Halifax. More than half of those respondents said that finding a sufficient deposit was the biggest barrier to owning a home.
The Scottish Labour plan, its first Holyrood 2016 election pledge, builds on the help-to-buy Isa, a UK-wide scheme launched in December. Under that arrangement, would-be buyers (or their parents) can pay £1,200 into the account initially and follow up with monthly deposits of up to £200. The interest is paid tax-free and the government then pays in a bonus of 25 per cent of the amount saved, up to a maximum of £3,000. The bonus can be paid whenever the saver takes the money from the account, but the proceeds must be transferred to a solicitor to ensure they are used for a mortgage deposit.
Over three years the help-to-buy Isa would amount to a maximum of just £7,200, however, leaving a significant shortfall on the deposit needed by most first-time buyers.
The Scottish Labour plan aims to boost buyers’ chances by doubling the government bonus. It would provide an additional £3,000 to first-time buyers regularly saving at least £100 a month into their help-to-buy Isa.
Regular saving would involve paying into the account for at least ten out of 12 months. A £500 bonus is available at the end of year one, another £1,000 at the end of the second year and a further £1,500 at the end of year three. The plan is per individual, meaning couples saving for a home together would get £6,000 from a Scottish Labour government after three years, in addition to the UK government top-up.
Scottish Labour said there would be further announcements over the coming months on social and affordable housing.
But any help for first-time buyers is welcome, said Dr John Boyle, head of research at Rettie & Co.
“Every little helps for first-time buyers. Their main problem in recent years has been accessing mortgage finance due to the high levels of deposit required.”
The initiative was also welcomed by Scotland’s housebuilders.
“This plan is a positive signal that the Scottish Labour Party recognises the need for an all tenure approach to tackle our country’s housing crisis and helps widen the debate beyond what has been an increasing and narrow focus on “affordable” homes,” said Philip Hogg, chief executive of Homes for Scotland, the industry trade body.
“Indeed, with research confirming that the majority of Scots aspire to be home owners, such an approach is vital if we are to meet the diverse needs of all those living in Scotland.”
But there is a risk that support focused on deposit assistance could simply backfire on first-time buyers by taking house prices further out of reach.
David Marshall, business development manager at MOV8 Real Estate, said: “It is obviously positive to see a proposal aimed at assisting first-time buyers, but there is a danger that this could serve to push prices up over time at the lower end of the market.”
Indeed, prices are currently being inflated by a marked imbalance between supply and demand.
Other measures aimed at boosting demand have included help-to-buy (Scotland), a shared equity deal that was fully subscribed two months into the 2015/16 round of funding. The launch of a new Scottish Government shared equity scheme in September attracted criticism that it was stimulating demand without tackling the lack of housing supply.
“The danger is that such demand side measures tend to raise prices, particularly if supply is stagnant,” said Boyle. “New supply numbers are still struggling – only half of what they were pre-crash.”
The Scottish Commission on Housing and Wellbeing last year urged the Scottish Government to increase new home builds to 23,000 a year, up from 15,258 (in the year to June 2015).
Failure to do so would exacerbate Scotland’s housing crisis, said the commission, which found that more than 150,000 households north of the Border are on the waiting list for social housing.
The number of new homes being built is down 40 per cent on 2007 levels, according to Homes for Scotland.
“We are simply not building enough to house our growing population, so any savings initiatives must be matched by those which stimulate production such as the popular Help to Buy (Scotland) scheme. This is essential if we are to meet increasing demand and provide the range of quality options required,” said Hogg.
What first-time buyers and other Scots need more than anything is a joined-up strategy that ensures all housing is affordable, said Marshall.
“That would have to look at a number of factors including housing supply, creation of amenities required to support new communities, mortgage structure and availability and property taxation,” he added.