Budget gives new house building a boost for six years
The March 2014 Budget has given the Help to buy Scheme for new houses an extension to 2020, another six years, which is a longer period than most analysts anticipated. The existing scheme of course has certainly been a success and it is good that the Government has shown that it is very much behind it.
The housing market needs 200,000 new homes every year, but for years the number actually built has languished around the 100,000 mark. Since Help to Buy started the number of new homes under construction has increased by 16%. In England it is estimated that a third of all new homes involve Help to Buy funds.
Of course this is all good news for the building industry who are recruiting additional staff and demand for building materials has increased. However there are already reports of shortages in some materials including building bricks, and shortages of some skilled tradesmen including carpenters, plumbers and brick layers. The construction industry will be wary of this sudden spurt in demand and be naturally cautious that it may be short lived.
This is why the Budget is such good news, as the Government have made it clear that the Help to Buy Scheme will remain with us for another six years, to 2020. This is the sort of confidence boost the industry needs to continue expansion in the work force and land acquisition. All this requires development finance, and having a positive forecast for the future helps builders and developers to commit to new finance facilities in order to drive their businesses forward.
Some people are concerned that the increased demand for homes will push up prices, there is already evidence that price increases over the last twelve months have been close to 10%. However, historically a booming building industry has often been the trigger for a booming economy. If new builds can start to come on stream at 200,000 per annum then this will take the pressure off rising prices and property should then find its correct value in a more competitive market.
Generally I believe this has been a good move by the Government.