The claim
“Today’s stats show they have only achieved a quarter of 1 per cent of their own target in the first six months, just 250 homes.”
Jack Dromey, 27 September 2012
The background
NewBuy was one of former Housing Minister Grant Shapps’s pet projects, one of a flurry of coalition policies designed to improve the country’s woeful housebuilding numbers.
The scheme is designed to help first time buyers get on the housing ladder, with the government offering guarantees to banks who offer mortgages with low deposits of 5 to 10 per cent.
The first statistical release on NewBuy came out today and was immediately greeted by a strongly-worded press release from Labour.
Shadow Housing Minister Jack Dromey said the figures showed “the vast gap between the Government’s rhetoric and the reality for those who want to realise their dreams of owning their own home”.
He added: “The Prime Minister and then Housing Minister Grant Shapps claimed NewBuy would help 100,000 people buy their own home. Today’s stats show they have only achieved a quarter of one percent of their own target in the first six months, just 250 homes.”
The analysis
The statistics do show that only 250 new home purchases were completed between 12 March this year and 30 June.
That’s not “the first six months”, it’s about three-and-a-half months. And nothing happened for the first. This is significant, because buying a house takes time.
We haven’t found an absolutely definitive source of statistics on the average length of time it takes to complete a house sale, but industry websites tend to warn first-time buyers of a delay of three or four months between putting an offer in and completing the sale.
Purely anecdotally, we think this estimate may be on the optimistic side, and it doesn’t include the time it takes to sort out your finances with the bank and actually find somewhere you like.
All in all, it would be very surprising if vast numbers of people had managed to complete property purchases in the first three-and-a-half months of this scheme.
The Department for Communities and Local Government makes precisely this point in response to Labour, and says the number of reservations, rather than completed sales, is a better measure of success.
A spokesman said: “With the average house sale taking up to six months, today’s statistics do not reflect the real progress of the NewBuy Guarantee since they only cover the first four months of the scheme’s operation.
“As the Home Builders Federation have recently reported, 1,500 reservations have been made through NewBuy and that at least 25,000 additional new homes will be built as a direct result of the scheme.”
The Home Builders Federation, an industry body which represents Britain’s biggest builders, confirmed the first figure but didn’t recognise the precise prediction attributed to them of 25,000 potential new homes.
A federation spokesman said the body was still backing NewBuy and pointed out that the scheme has attracted more interest from developers and lenders since it was launched.
He said: “These figures do not represent the current position and increasing popularity of NewBuy.
“Buying a home is a lengthy process, and so for a scheme only launched in March, with just seven developers and four on board at launch, the number of sales at the end of June was never going to be high.
“There are now over 30 developers signed up and six lenders and take up in the past few weeks has markedly increased.
“The take-up profile has been similar to the successful Firstbuy scheme and we have now had over 1,500 reservations.
“House builders are now implementing effective marketing campaigns – that took time to develop and launch – to raise awareness of the scheme, and since June the mortgage rates have dropped.
“As more builders and lenders sign up and awareness increases we fully anticipate the take-up to continue to rise and the scheme to deliver the tens of thousands of sales initially anticipated.”
Tens of thousands would be a step in the right direction but won’t solve Britain’s housing crisis. And it would still see the government fall short of its target of 100,000 homes.
It’s probably unfair to dwell too much on that number. Mr Shapps did repeatedly say that “up to 100,000” new mortgages might be arranged thanks to NewBuy.
That’s not quite the same thing as a target of 100,000, and government rhetoric has generally been more vague since the launch, with claims that NewBuy “is offering help for thousands of people”.
Clearly though, the government was hoping take-up would be in the region of 100,000, and if they are now talking about 25,000, that’s a significant lowering of expectation.
The verdict
Labour are putting the worst possible spin on these figures and ignoring the fact that NewBuy was always going to take months to get up to speed.
Reservation figures suggest more than 1,000 are keen to take advantage of NewBuy and the take-up rate could accelerate with more lenders and builders on board.
We’ll have to wait for at least a year to come to any sensible conclusion about whether it is a success or failure.
Some caution is also needed in reading DCLG’s response. The Home Builders Federation don’t quite admit ownership of this prediction of 25,000 new homes.
And we note that DCLG are now talking in terms of the low tens of thousands instead of 100,000 – suggesting that they are not expecting NewBuy to fulfil its maximum potential.
By Patrick Worrall
