Help to Buy – Wales

Finding myself at a loose end I did what I often do to ward off ennui – I delved into StatsWales, a site I recommend to anyone with a strong stomach who is free from high blood pressure or problems with their cholesterol levels.

Once there, and presented with a choice of options, I first went for ‘Housing’ and then the sub-heading ‘Help to Buy’. Then I was presented with a number of tables giving facts and figures for this scheme. For those unfamiliar with Help to Buy – Wales here’s a link to the ‘Welsh’ Government’s sooper-dooper new-style website where all is explained.

And here’s a link to the Buyer’s Guide. In a nutshell; you need to come up with 5% deposit, 75% mortgage, and then you apply for a 20% equity loan from Help to Buy – Wales to complete the purchase of a new-build home. It’s basically a programme to stimulate the building industry.

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Going through the various tables, and making comparisons, certain anomalies began to appear, anomalies which, when I gave them some thought, were rather worrying, for it was difficult to think of an acceptable or innocent explanation for some of the curious data confronting me.

So let’s go through some of the figures provided and start with the headline figure that tells us 7,402 Help to Buy purchases have been completed.

The next table ‘Help to Buy – Wales completed purchases by local authority and date’ gives us a breakdown by local authority for that 7,402 figure, and it’s now that the anomalies begin to emerge. (You’ll need to click on the ‘Full Screen’ icon at the top of the page to view the full table.)

Diving in . . . why have there been 1,339 completions in Newport (population 151,485, 2017 mid-year estimate) but only 326 in Cardiff (362,756, ditto)? Or why should there have been 768 completions in Flintshire (155,155) but only 205 in neighbouring Wrexham (135,571)? Moving to the south west we see that Carmarthenshire (186,452) completed 645 while in neighbouring Pembrokeshire (124,711) it was just 191, while up the road in Ceredigion (73,076) it was a measly 21!

Moving down the list, a table I found very interesting was the one dealing with house prices, which is worth spending some time on because it raises more questions about the workings of the Help to Buy system. Let me explain what I mean.

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Earlier we noted that there were many more properties bought with Help to Buy in Carmarthenshire than in Pembrokeshire and Ceredigion combined. The table suggests that this may be due to most of the properties sold in Carmarthenshire being under £150,000, which would suggest that there the scheme has been used to help first-time buyers, who reassuringly made up 80% of sales, one of the highest percentages in the country. By comparison, the first-time buyer figure for Torfaen was just 59%.

The figures for Merthyr I find very strange. Without wishing to do the area down, I was surprised to see that 68% of the Help to Buy properties there were priced at over £150,000. For Carmarthenshire – where property values are higher than Merthyr – the figure was just 24%. The figure for Swansea is 25%, and for Blaenau Gwent, the other Heads of the Valleys authority, it’s 22%.

So why are people buying such expensive houses in one of the poorest areas of a poor country?

For most areas – even Merthyr – there is a tailing off as we approach the £300,000 limit, which is to be expected. Yet in the following local authority areas the top price bracket shows an increase in completions over the cheaper band preceding it: Conwy, Denbighshire, Flintshire, Wrexham, Vale of Glamorgan, Cardiff, Torfaen.

For Flintshire, the figures are striking: 99 completions in the £200,001-£225,000 bracket, 105 in the £225,001-£250,000 band, and then a leap to 150 in the top £250,001-£300,000 band. Which means that 89% of the properties bought in Flintshire using Help to Buy were priced at over £150,000.

According to the Land Registry, the average house price in Flintshire in June 2017 was £162,703 (and has since dropped). For Merthyr the figure was £98,172. The figures for all local authority areas are available here, scroll down.

In the hope of pulling everything together I decided to compile a table of my own. (Available here in pdf format.) The columns show, from the left:

  1. The local authority.
  2. The area’s population from the ONS’ mid-year estimate for 2017.
  3. A breakdown of the prices of properties bought with Help to Buy (split into four bands rather than the eight supplied by StatsWales).
  4. The total number of Help to Buy completions.
  5. The number and percentage of first-time buyers.
  6. The average house price for each area in June 2017, supplied by the Land Registry.
  7. The average price paid for a Help to Buy property.
  8. The difference between 6 and 7.
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So in addition to the questions already posed, why have there been so many Help to Buy purchases in some areas and so few in others? As mentioned, the most obvious stand-out is Newport, which with 4.8% of the population accounts for 18.7% of the Help to Buy completions.

Could it be that many, or most, of the Help to Buy purchases in Newport are investments in anticipation of the expected influx of Bristol commuters? Come to that, are many of these properties being bought by Bristol buyers thinking ahead? It’s difficult to explain the Newport anomaly without bringing Bristol into the equation.

But whatever the explanation, isn’t Newport taking up a disproportionate amount of the £170m available? Is there no mechanism to ensure that all parts of the country are treated fairly?

As for Flintshire, we can reasonably assume that many of the buyers there will have come from over the border, which points up another serious shortcoming in Help to Buy.

It would be nice to think that this scheme focuses on first-time buyers, local young people buying their first home. We have the excellent example set by the three south western counties but elsewhere the picture is patchy. With 83% of Help to Buy sales in Wrecsam and Cardiff being made to first-time buyers but just 59% in Torfaen, Newport’s hinterland.

Carmarthenshire also deserves praise for the fact that 76% of the properties sold in the county with Help to Buy were priced at £175,000 or under. Which when coupled with an 80% first-time buyer figure suggests that it’s young locals being helped.

You’ll notice that in three local authorities – Vale of Glamorgan, Pembrokeshire, Monmouthshire – the average Help to Buy price is lower than the average sale price for those areas. But Monmouthshire and the Vale have the highest property values in Wales so this is nothing to worry about. While for Pembrokeshire we see that 77% of the Help to Buy properties were £175,000 or less which, when coupled with an 85% first-time buyer rate, suggest that it’s on the same righteous path as next-door Carmarthenshire.

Though I’d like an explanation for why there have been so few Help to Buy sales in Ceredigion. (And I don’t want any Cardi jokes!)

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And then there’s Merthyr. I can think of no good reason why most of the properties bought there with Help to Buy were priced over £175,000 when the average house price is £98,172. And why are only 67% of them first-time buyers? Somebody’s taking the piss.

Administered properly Help to Buy could have done a lot of good. If it had been limited to first-time buyers and those who had lived in Wales for a minimum of five years. But because the impetus was to build more houses, and because the more expensive the house the bigger the profit margin, ‘anomalies’ were guaranteed.

So you have to wonder who was responsible for putting this programme in place, and vetting the various participants. For when we look at the participating lenders we find the Darlington Building Society, with just four branches, all in North Yorkshire. Or the Chorley Building Society, with three branches, all in Lancashire.

When we look at the list of participating builders we see a long list of companies, a list that contains quite a few outfits that I bet have never laid a brick in Wales.

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Going back to the ‘Welsh’ Government website, those thinking of using Help to Buy are also advised to find, in addition to a builder and a lender, an approved financial advisor and an accredited conveyancer. Clicking on the links for these brings up the same long list of professionals, and again, many of them are outside of Wales. Bristol and Chester seem popular locations. (List available here in pdf format.)

As I say, properly applied and administered Help to Buy could have helped a lot of our people, and given a boost to Welsh companies, but like most legislation that passes through Cardiff docks and then into the hands of civil servants it is intended that as much as possible of the benefits spread over the border.

And inevitably, there will be some jiggery-pokery, as alliances are forged between builders, solicitors and lenders. Other may be drawn in, such as local government officials and councillors. Also, friends and family of those involved will be ‘helped’ to apply for Help to Buy.

Standing back, looking at the big picture, one thing becomes clear. By and large, the Help to Buy programme seems to have been implemented more sensibly, more fairly, and less wastefully, in those local government areas that are not controlled by the Labour Party.

Make of that what you will.

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