Is "Help to buy" legitimate? Not on closer inspection.
The questionable gift horse
Who benefits from a property market bubble?
The BBC reports that Ernst and Young are warning that we are heading toward a price bubble in the London housing market. Nothing to do with Cameron's "mortgage assistance", I'm sure. I mean artificially supporting market entry with government under-writing wouldn't contribute to an inflationary bubble, would it? I mean you couldn't predict that in a month of Sundays. That won't be it at all. Of course not. The fault lies entirely with those pesky foreign investors, who bring in their filthy foreign lucre to speculate on the London market. The "help to buy" scheme can't have the finger pointed, because the scheme is carefully checked so as not to underwrite speculators. The fact that it is being buoyed up from beneath all but guaranteeing short-term appreciation couldn't possibly attract even more non-resident buyers to speculate, regardless, could it?
In truth, I have no doubt foreign investors are a contributing factor, but then if the market were not quite so buoyant they probably wouldn't be so keen to invest. There are buyers who left to their own devices would be too high a risk to raise the capital to jump in, but is the very purpose of this policy to draw them in. The harsh reality is that these people should not be able to afford to buy. The prices have been pushed out of their reach, which implies they are unsustainable, and as cold-hearted as it may seem to say they should have to wait for prices to settle again before they had a hope of getting into the fray. Naturally, the Tories in particular don't want a drop in the market. At least not yet. They have a vested interest in not letting it happen.
Whilst allowing an over-inflated market to deflate slowly and re-level itself as the natural inflation in incomes allows the two to converge once more, it would also mean that the people whose wealth depended on property portfolios - who on the whole are natural Tory supporters - would be facing material losses. Instead buyers who in a true free market could not currently afford to buy are now are able to pitch in and over-stretch themselves and take risks the lenders would otherwise not allow. It's win/win for those who have property wealth, because the money-bags will see their losses underwritten, but there WILL be defaulters, and those with investable wealth will at some time find themselves with another low-cost source of easy property to snap up, particularly when the scheme eventually comes to an end and there is a time glut of defaults that those with money can prepare their liquid assets to exploit. And of course, once over-stretched buyers are saddled with the single biggest debt of their lives, they cannot afford to risk voting except for the party which will continue to support their risk. It is the political equivalent of a vendor lock-in.
The whole support scheme is too cynical for words, and I am astonished that anyone takes it at face value. (I suppose when you have had it drummed into you that buying is the only measure of life success, then that IS what you, do. By hook or by crook you do it, and don't look beyond the means.) But really, folks, this is one gift horse whose teeth one should examine most closely.
