Since its launch in 2013, Help to Buy Equity Loan, aimed at 
buyers of new build, has played a significant part in supporting sales of new homes. The extension of the scheme to 2020 enables housebuilders to plan ahead for growing demand.

The initial investment of £3.5 billion, which is expected to support 74,000 sales, has so far helped more than 25,000 households buy or reserve a new build home. The Government says the further £6 billion investment will help 120,000 more households purchase a new home. Funds will also be available for Wales and Scotland, although the Scottish and Welsh Governments are not obliged to use the funds for a Help to Buy Equity Loan scheme.

According to the Treasury, Help to Buy Equity Loan is supporting 30% of new build sales. The lower value property markets across England have felt the biggest impact. By comparison, London has seen very few deals.

Savills analysis shows that in Cannock Chase in Staffordshire, 
the scheme supported 48% of new build sales. It is followed 
by Derby and Gravesham (which partly includes Ebbsfleet in Kent) where 45% and 40% of new build deals respectively were down to Help to Buy 1.

Of the 14,823 completed sales to date only 977 have been in London. Nine boroughs in the capital (including Kensington & Chelsea, Westminster and Richmond) have seen no deals at all. 
A few London boroughs have seen high levels of new build 
sales as a result of the scheme, including Barking & Dagenham (37%) where prices are still 8% below their 2008 peak levels.

Following a surge in Help to Buy sales at the end of 2013, the rate of take-up has slowed from 2,500 deals a month to 1,642 deals in February. This could be the result of a lack of available properties and demand may rise again if the rate of building increases.

Assuming continuing take up of 2,000 deals a month at the current average equity loan of £40,000, the allocated funds could last beyond the proposed end date of 2020. At 3,000 sales per month, the current size of loan the funding would last until early 2020, but at 4,000 it would be exhausted in mid-2018.

Planning an orderly end to the scheme remains crucial particularly 
if smaller companies become increasingly reliant on the Government support. According to the HBF, 94% of the builders taking advantage of the deal are small and medium-size businesses. Tapering is likely to be the best option.

Taken from
Spotlight: What's Next for Residential Development?