"Help to Buy" scheme - storing up trouble?

Chef

LE
I'd say it's storing up trouble.

40% on a London property is going to be in the area of £120k for a new build round my neck of the woods. There's a lot of new builds and the average price is nearer £350k. So when the interest comes due it's going to make a sizeable dent in your monthly budget. Equally if you can afford to clear it in the five year period I'd have thought you'd be better off doing without government assistance.

Personally I wouldn't touch a new build, as Bravo Bravo observes they're small and cheaply built, at least the show homes we looked at were. (A fun way to pass an hour or so, no intention of buying).
 
There was, I think by BBC, an hour's program about Persimmon Homes deep in deep pooh over appalling quality of build...including missing attic fire-walls...all allegedly geared up to mass produce/quick build on the back of Help to Buy. It looks like Cala are not the only guilty parties.

Locally, I'd say the only quality houses being built are sole developments of perhaps a half dozen homes on 5th/6th acres as farmers...or stretched developers.... sell off odd bits to small niche developers. However, they tend to be 200k to 350k plus which for up here, still gets a considerably large detatched 4 bed/ 2 public/ double garage + affair.
The rest? We see utter crap getting chucked up within 4/6 weeks of the rafts & ground services being laid.
Cheap brick, frames look like really cheap & nasty stuff, dodgy looking variances in mortars.

Our son & we did our homework well over the last year and ditched new builds.
Just 5 weeks back we nailed a lovely wee 30 year old end terrace, new fitted kitchen, new quality DG etc with large great zero maintainance front and rear gardens, numbered parking space, and in perfect overall condition looking over fields for a fixed price of just 2 thirds(!) what a locally built new 2 bed would have cost...which also screamed utter sh"t.

We were very very fortunate to nail it though. We plonked a few hundred on it over a witnessed handshake with the owners so they were made up over that deal and cancelled the next batch of viewers. I think they liked the notion of having a police person moving in beside old neighbours. I had the offer done by courier by 10am the next morning...fixed price remember. First come first served. It's getting chronic up here...big shortage of decent 1st/2nd buyers stuff.
I think "our kid" is still pinching himself...quietly.
 
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anglo

LE
The new builds where I am are not even rabbit hutch size, more like guinea pig size,
with the small gardens, the build quality is appalling, timber framed rubbish.
 
Saw this in the local rag the other day - Young homeowner's horror as Cottam Taylor Wimpey house becomes "infested" with plaster beetles (apologies for the stupid amount of ads).
What caught my attention was the fact that the women interviewed is 22 and living with her boyfriend.
In a new £250k house.
She doesn't strike me as the wealthy type and I have no doubt that she has taken advantage of the HtB scheme, but this does seem very much like there is a problem looming much like the last 'self-certified' mortgage issue which was partly to blame for the 2008 crash.
This time it's with public money though. One guy I know who explained some of the thinking behind these schemes is that it is assumed that by the time it comes for the borrowers to be paying off the debt, they will be earning much more money.
Obviously someone hasn't been following the news that pay rises and the average wage in the past 10 years haven't shifted very much.
As BB said, there is going to be much grief to be had in the coming years.
Still, I'm happy in my large 4 bed ex-council house which cost a third of that new build, has a large park next door and front/back gardens :)
 
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Blogg

LE
All of the above.

Speaking to one of No.1 sons friend and his new bride, absolutely astounding to me that whilst singing the praises of a help to buy scheme (overpriced and undersized grotbox of course but first home and all that) he had actually wholly discounted the fact that whilst they "only" paid 1.75% interest in year 6, each year theresfter increased by 1% plus any RPI increase.

That guarantees having to trade up or out or remortgage at about the same moment in time as a lot of others will be trying to do precisely the same.

That is going to lead to a lot of price pressure.

In laws already suffered from that indirectly, took long time to sell their 1980's built house, extended and in excellent state, because help to buy/new builds were soaking up so much of the local market.
 
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Saw this in the local rag the other day - Young homeowner's horror as Cottam Taylor Wimpey house becomes "infested" with plaster beetles (apologies for the stupid amount of ads).
What caught my attention was the fact that the women interviews is 22 and living with her boyfriend.
In a new £250k house.
She doesn't strike me as the wealthy type and I have no doubt that she has taken advantage of the HtB scheme, but this does seem very much like there is a problem looming very much like the last 'self-certified' mortgage problem which was partly to blame for the 2008 crash.
This time it's with public money though. One guy I know who explained some of the thinking behind these schemes is that it is assumed that by the time it comes for the borrowers to be paying off the debt, they will be earning much more money.
Obviously someone hasn't been following the news that pay rises and the average wage in the past 10 years haven't shifted very much.
As BB said, there is going to be much grief to be had in the coming years.
Still, I'm happy in my large 4 bed ex-council house which cost a third of that new build, has a large park next door and front/back gardens :)
Quite.
We paid 17k for ours 3 bed 23 years back. We got lucky...for once. Mortgage was half the rent for 15 years. Happy in it having developed it over 20 years. We'd not have bothered had a family lawyer doing our wills had not brought us to our senses.

My bold to your bit?
Those who thought that way perhaps forget people make choices good or bad like having a nipper, which means the titted one often gives up work or goes PT at best...with killer childminding fees on top...etc etc. Life eh? Problem is in my view....Millennials appear to be more hardwired to living on the edge of crushing debt these days.....sometimes out of their perceptions of necessities. This is all very well till Old Murphy pays a visit.
 
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No. I am not a gardener anyway but the grounds and flats are managed thus grass cut regularly.
This does cost me £1,100 pa but includes insurance and the outside flat maintenance.
Plus £5.00 pa ground rent.
I have seen some photos of before this happened and some of the flats were surrounded by prairie land.
However a number of people have turned parts into private (but not fenced off gardens) and this improves the whole area.
I have lived here since 1986 and so far have had only one nuisance neighbour.
$1,100 pa, wow, my condo (east of Toronto which I sold 5 yrs ago), cost £531 PER MONTH for building & grounds maintenance. They also have a scheme where your unit designation determines *special* replacement costs, at one point they (condo corporation) decided to paint, repair, & resurface the underground parking garage. It cost a Prime 4 (1 bedroom) unit £1400 whereas a Prime 1 (3 bedroom) unit paid $3800 for exactly the same work.
 
I gather usual practice is to buy the land on which the property has been built...
And?

My point was that a developer will have the expense of buying the land and building the property. The initial house buyer will find that his purchase price includes a pro rata sum of money that reflects the cost of the land on which his/her house sits.

Subsequent sales will not reflect the need to recoup initial outlay for the land on which the house sits.
 
$1,100 pa, wow, my condo (east of Toronto which I sold 5 yrs ago), cost £531 PER MONTH for building & grounds maintenance. They also have a scheme where your unit designation determines *special* replacement costs, at one point they (condo corporation) decided to paint, repair, & resurface the underground parking garage. It cost a Prime 4 (1 bedroom) unit £1400 whereas a Prime 1 (3 bedroom) unit paid $3800 for exactly the same work.
I consider myself very lucky.
 
In laws already suffered from that indirectly, took long time to sell their 1980's built house, extended and in excellent state, because help to buy/new builds were soaking up so much of the local market.
Now you said this?
It perhaps explains why my son's new home, adjacent to new builds, went down 6k from offers over comparable price to fixed? In a nice countryside-ish high demand area for 1st time buyers as well.
Back in the day and prior to Help to Buy developers, this area was known for these homes only being listed for a week or ten days. Back in the 80's they were bought unbuilt from plan!
Had not figured that one till your post. Mmm...
 
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I consider myself very lucky.
You should. So do we on a number of levels, one being rent if we had not bothered of £340.00 per month out of fixed pensions.........
Our future "issue" is, however, bullet-proof dodging the survivor of us possibly having it sold over our heads in law to pay for nursing home care...if it gets to that stage, until the property value is exhausted. You need to be careful...the DSS can and do retro-examine how you did it and will still have it off you. They really do cover all the bases...including " deliberate deprivation of working capital" via equity release schemes. Very difficult.
 
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You should. So do we on a number of levels, one being rent if we had not bothered of £340.00 per month out of fixed pensions.........
Our future "issue" is, however, bullet-proof dodging the survivor of us possibly having it sold over our heads in law to pay for nursing home care...if it gets to that stage, until the property value is exhausted. You need to be careful...the DSS can and do retro-examine how you did it and will still have it off you.
My father made 95 and was independent till his last week.
I have 2 Moto Guzzi's in the garage and cannot conceive of not being able to ride them.
Putting me in a care home would be a death sentence.
 
My father made 95 and was independent till his last week.
I have 2 Moto Guzzi's in the garage and cannot conceive of not being able to ride them.
Putting me in a care home would be a death sentence.
I'm maybe over thinking it from a less than positive outlook.
Me too, life without my wee Roadster would be......hell.
 
And?

My point was that a developer will have the expense of buying the land and building the property. The initial house buyer will find that his purchase price includes a pro rata sum of money that reflects the cost of the land on which his/her house sits.

Subsequent sales will not reflect the need to recoup initial outlay for the land on which the house sits.
Of course subsequent sales will involve paying for the costs of land.
 

NSP

LE
$1,100 pa, wow, my condo (east of Toronto which I sold 5 yrs ago), cost £531 PER MONTH for building & grounds maintenance. They also have a scheme where your unit designation determines *special* replacement costs, at one point they (condo corporation) decided to paint, repair, & resurface the underground parking garage. It cost a Prime 4 (1 bedroom) unit £1400 whereas a Prime 1 (3 bedroom) unit paid $3800 for exactly the same work.
Nowt unusual there - the leasehold on my building apportions different percentages of the service charge based on size. One-bed pays 8.something%, two-bed 9.something% and two-bed with garage 10.18%. Something to do with owning more of the building and thus having more to insure, more windows to clean, and so on. However, it turns out that the two flats with the garage have to pay for their own maintenance on the garage block despite paying more of the annual budget so I'm in discussions with the director of the resident's management company about sending the lease up to the tribunal for review and adjudication - even moreso as my solicitor has pointed out that one of the clauses failed a court test and was struck down about eight years before my building was built (and thus the lease drawn up) and so it's likely that a court would rule the whole document bobbins.

I'm confident that the director will be persuaded to instruct the building manager to sort it out.

I pay about £1200 a year, peppercorn ground rent.
 
And here was me thinking that you were some sort of financial whizzkid raking in the dosh.

Or was it a short burst of runaway gums ?
That's just the point . The main beneficiaries haven't been people struggling to get on the housing ladder at all , it's been the middle class .
 
Of course subsequent sales will involve paying for the costs of land.
Really? If you believe that, then why isn't the subsequent sale price always over and above that paid by the first buyer? Does the subsequent sale price include the developer's costs of building the thing also? Sub-contractors, initial connections to utilities, etc?

A hint: the answer is not 'yes'.
 
Really? If you believe that, then why isn't the subsequent sale price always over and above that paid by the first buyer? Does the subsequent sale price include the developer's costs of building the thing also? Sub-contractors, initial connections to utilities, etc?

A hint: the answer is not 'yes'.
It is, actually.

Or do you believe the initial buyer will always sell at a loss?

I'm not saying you're ignorant or naive when it comes to property, but you're the kind of bloke that would allow someone to come in and fit carpets to a house before you'd sold it to them...
 
It is, actually.

Or do you believe the initial buyer will always sell at a loss?
Impossible to answer as that is dependant on geographical location, interest rates, nature and style of the property.

I'm not saying you're ignorant or naive when it comes to property, but you're the kind of bloke that would allow someone to come in and fit carpets to a house before you'd sold it to them...
Not quite sure where you pulled that one from, though I have a suspicion that's it's South of your head.
 

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