Help to Buy

Meeting: 
MQT on 2013-05-22
Session date: 
May 22, 2013
Reference: 
2013/1796
Question By: 
Gareth Bacon
Organisation: 
GLA Conservatives
Asked Of: 
The Mayor

Question

How will London benefit from the Help to Buy scheme announced by the Chancellor in March's Budget?

Answer

Answer for Help to Buy

Answer for Help to Buy

Answered By: 
The Mayor

Boris Johnson (Mayor of London): Gareth, thanks very much. London will benefit to the tune of half a billion in the Help-to-Buy programme and that will help many Londoners (and we discussed it endlessly this morning) to get a foot on the property ladder, which is currently inaccessible to them.

Gareth Bacon (AM): Yes, thank you, Chairman. Of course the Help-to-Buy scheme is aimed at new build, providing mortgages for new-build homes. Has your office done any kind of analysis at this stage to show what impact this could have on the viability of construction projects in London?

Boris Johnson (Mayor of London): We do think it will help. It will certainly help, and apparently Barratt Homes are reporting particularly strong levels of interest and demand. Londoners will be able to buy homes up to the value of £600,000 by borrowing 20% of the value of their property interest-free for five years in return for the Government taking a stake in the equity of the property. I think this will help to get the housing market moving but we have to be realistic, Gareth, it is going to be a pretty small proportion of the total number of homes we need to supply. We need to supply hundreds of thousands of homes over the next five to ten years; that is going to be done by all the things we have been talking about, de-risking public land, getting the pension funds to invest in housing, giving London Stamp Duty Land Tax (SDLT), for instance, to spend on new housing or getting the value of SDLT to spend on new housing and so on.

Gareth Bacon (AM): Some critics of the scheme, not least the outgoing Governor of the Bank of England, feel if this scheme were prolonged for an indefinite period it would cause considerable economic problems, not least a massive housing boom that would be unsustainable. Do you agree with that? Do you agree it should be a temporary measure to provide a shot in the arm to the construction industry and also to provide people with a foothold on the ladder? If so, will you be working with the Government to make sure that there is no need to extend it?

Boris Johnson (Mayor of London): I notice that house prices in London continue to remain extremely buoyant; they went up by 7.6% last year. I am concerned that the market is very, very strong at the moment. There is the risk in my view of a correction. I do not happen to think it will be a very severe correction because the demand is likely to remain so strong. What we certainly would not want to see is a sudden bust in asset prices of the kind that we saw in America. I think that is very unlikely and I think it is unlikely that this policy in particular will lead to that, but the crucial thing to do to manage the market is to increase supply. The problem in London and the problem in the rental market, the problem in affordable, can all be boiled down to a shortage of supply that needs to be addressed.

Gareth Bacon (AM): Thank you.