AS IT stands, potential property buyers can put down a five per cent cash deposit on a new build home with the government’s Help to Buy scheme. The government lends 20 per cent of the cost, leaving the buyer to secure the remaining 75 per cent from a mortgage lender. According to the Ministry of Housing, a total of 158,883 properties had been purchased using the government’s Help to Buy equity loan scheme as of April 2018. However, this could be set to change.
The policy, which was introduced in 2013, is currently under review and recent news has revealed that the government scheme could be abolished when current funding ends in 2021. It comes after research revealed that some households were taking advantage of the scheme to upgrade their current home. A loophole in the policy allowed homeowners spouses’ – who has never bought a property – to apply to scheme despite having combined salaries of over £100,000.
What could this mean for investors?
Developers are concerned that scrapping the Help to Buy scheme could have a devastating impact on the housing market and construction industry. Since the Help to Buy scheme was introduced by David Cameron the number of new build developments has skyrocketed, presenting opportunities for property buyers, developers and investors alike.
Terminating the scheme would give developers just three years’ notice to tie up loose ends and finish projects. It is reported that the government could issue a temporary and restricted version of the scheme to avoid any disruption. Therefore, investors with money currently in new build developers would unlikely be negatively affected.
Investors are unlikely to experience any change as a result of the termination of the Help to Buy scheme. New build property developments won’t cease to exist, nor will the demand for new homes. The government housing target of an additional 300,000 new homes per year, reflects the insatiable demand for housing.
Is there another option for property investors?
Many investors who want the ease of investing online but the benefits of property, an alternative lender to consider is Wellesley. Companies such as Wellesley allow investors to support residential building and invest from the comfort of their own homes via the Wellesley Property Mini-Bond. The Property Mini-Bond offers the stability of a fixed return of up to six per cent per annum gross, and the flexibility to receive interest monthly to achieve a regular income or to roll it up and receive it at maturity.
Funds subscribed to the Property Mini-Bond are invested alongside Wellesley’s own funds and backed against UK residential property. Ensuring that all funds are spread across all eligible loans for maximum diversification.
It is important to note, that as with most investments investor’s capital is at risk and interest payments are not guaranteed. Property investments may not always go to plan and may suffer from delays or reduction in the value of the assets. Investment through Wellesley is not covered by the Financial Services Compensation Scheme (FSCS).