A recent report from Morgan Stanley entitled, Help to Buy: More Beneficial Than The market Thinks, caught my eye for a number of reasons not least the fact it offers a far more thorough and reasoned approach to the scheme than many have provided over the past few months.
As you might imagine from the title, the thrust of the report focuses on the opportunities Help to Buy might bring, in particular it asserts the scheme is likely to provide a considerable boost to housing supply – the authors believe housing starts could increase by 30 per cent up to 2015 – and it could help underpin continued improvement in the UK’s GDP figures.
However, in amongst the positivity were a number of issues that need to be addressed not least the fact that a clear exit strategy for the scheme must be outlined soon.
Morgan Stanley suggests the Government exit from the scheme must be clear within 18 months and that there is a serious risk of a cliff effect for the housing market if the exit is not smooth.
The authors have looked specifically at the use of the private insurance sector in other countries where similar Government schemes have been established – Australia, Canada, Hong Kong, etc – and concluded that utilising the private sector come exit strategy time is an absolute must.
There is no specific conclusion or recommendation about how this might be achieved, however, the report does suggest the routes taken in other countries – namely takeover of the scheme by a private insurer, introducing private competition or via re-insurance – provide sound examples to follow.
Needless to say we wholeheartedly agree with Morgan Stanley on this and, with the launch of the guarantee scheme less than four months away, it is time for the market to have full sight of the detail, in particular how the Government is likely to extricate itself when the proposed three-year term is up.