Apartment in the Canary Wharf area of London Author: HENRY NICHOLLS | Reuters
In 2013, the United Kingdom already launched a loan program of up to 20% of the total price of the property
Guarantees announced by the president Pedro Sánchez They are not new in Europe. Great Britain already launched a similar program in 2013. It called it Help with purchase (HtB) and he tried to make it easier for citizens to access their first home. As? WITH guarantee of 20% of the total price —40% for properties located in London— and five years interest-free. In this way, only a 5% deposit was required from buyers to apply for a mortgage.
What did this plan turn into? According to a 2020 London School of Economics report higher prices, fewer houses and juicy profits for builders. “We can conclude that credit expansion policies such as HtB may be ineffective when there are strong supply constraints and in areas that are already unaffordable,” the authors state.
And that is that the results differ when we zoom in on Wales (maximum 261,580 euros per home) or London (688,000 euros). In the capital, the guarantee program “led to a significant increase in the prices of new properties of approximately 6%. However, this did not have a significant effect on construction activity”, they point out. What happened in the less burdened areas? “In areas between England and Wales, we find a significant effect on construction activity, but no effect on prices,” they conclude. In fact, real estate was shrinking in size. In both cases, yes, those who won are not citizens: «The main beneficiaries of HtB in already inaccessible areas can be construction companies and land owners […] While access to housing initially improved (along with the easing of credit constraints), the immediate financial burden associated with purchasing a home further increased,” they note.
In the conclusions of the report, its authors warn that the program had the opposite of the desired effects: «HtB encouraged construction in wrong zones: that is, in areas with less rigidity, and not in areas where the concentration of employment and productivity is higher and where more new housing is needed».
Source: La Vozde Galicia
I am Jason Root, author with 24 Instant News. I specialize in the Economy section, and have been writing for this sector for the past three years. My work focuses on the latest economic developments around the world and how these developments impact businesses and people’s lives. I also write about current trends in economics, business strategies and investments.
