‘I wish I had never bought my Help to Buy flat — it's lost £40k'

Times

3 days ago

If Connie Duxbury could go back in time, she never would have bought her Help to Buy flat.
When Duxbury, 30, and her husband, Ollie, 31, were paying £1,500 in rent for a one-bedroom flat in Hammersmith in 2020, the Help to Buy scheme appeared to be a quick way onto the property ladder.
It was created in 2013 to help aspiring first-time buyers own a home and allowed borrowers with at least a 5 per cent deposit to take a government loan, interest-free for five years, worth up to 20 per cent of the property's price (40 per cent in London). The idea was that because the government loan was interest-free, it would make owning much cheaper than renting.
The scheme, which closed in March 2023, was only available on new-build homes. The Duxburys hoped to buy a flat, then sell after a couple of years and move to somewhere bigger.
Instead, they have gone backwards. The two-bedroom flat in Croydon they bought five years ago for £390,000 — helped by a 25 per cent loan from the government — finally found a buyer in March for £352,000, after three years on the market and three price reductions.
This came after a six-month delay to it being built, drainage problems that left sewage coming through the wall and cost £5,000 to fix, and two years fighting the block's management company to avoid a £20,000 a year service charge.
While what they owe to the government has fallen from £97,500 to £88,000 in line with the fall in the property's value, they also owe £270,000 on their mortgage — almost as much as their original mortgage of £273,000.
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They will lose all of the £19,500 deposit they used to buy the flat and, as they are selling for £6,000 less than they owed their mortgage lender and the government, they don't have enough savings left to buy another property — and will be forced back into renting.
'We thought we were doing what you were meant to do, which was save up, buy somewhere, sell it, make a little bit of a profit and move on,' said Duxbury, who works for an energy company.
'I'm actually looking forward to renting again, because I know that if something goes wrong it won't be up to us to pay to fix it. We would only buy somewhere if it was a house — I would never buy a flat again.'
The couple will join thousands who used the government's £24.7 billion Help to Buy scheme only to see their flats fall in value.
The government loan is at a fixed equity rather than value, meaning that if it lent you 20 per cent you will pay back 20 per cent of the value at the time of repaying, even if that is less money in actual terms because your property has fallen in value. If your property rises in value you will have to pay back more than the original loan.
Some 11,452 flat owners in England have repaid their Help to Buy loans at a lower value than they borrowed — that's 35 per cent of the total 32,776 loans repaid between 2013-14 and the end of 2023-24. The figures were obtained in a freedom of information request to Homes England, the government agency that administered Help to Buy.
The problem is getting worse. In 2015-16 only 6 per cent of the 716 government loans against flats were paid back at less than someone had borrowed, either when the buyer sold or remortgaged, but by 2024-25 the number had risen to 45 per cent of 5,173 repaid loans.
The fall in value has been limited to flats. Over the same timeframe the proportion of Help to Buy houses where the loans were repaid at a lower value fell from 13 per cent to 3 per cent.
This is the trend you would expect for houses, given the average UK property price has increased 53 per cent to £268,652 since January 2015.
But the flat market has been stagnant over the past ten years, driven largely by the cladding scandal that followed the Grenfell Tower fire in June 2017 then the pandemic-induced race for space.
In May 2017, the average semi-detached house sold for about £196,250 — 15 per cent more than the average flat, which went for about £171,000. By May this year, the average semi-detached house sold for about £270,500 — 36 per cent more than the average flat at about £198,250.
Help to Buy flats have fared particularly badly. Some 16 per cent of all flats bought between 2013 and 2023 were sold at a loss, according to the estate agency Hamptons, less than half the proportion revealed by the Homes England figures.
Sebastian O'Kelly from the advice charity the Leasehold Knowledge Partnership said the market for flats had become 'toxic' amid 'shocking revelations post-Grenfell of how badly some of them were built.'
He said: 'As well as housebuilders letting down their customers, they have also diddled taxpayers, as we subsidised these purchases through Help to Buy.'
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Help to Buy ran for ten years and was used on 387,195 properties bought for a total of £109.2 billion. The loans were interest-free for the first five years and would be repaid either when a buyer sold, remortgaged or after 25 years.
It was designed to encourage housebuilding and lending to first-time buyers with small deposits after the financial crisis.
However, it has also been accused of pushing up house prices and enriching developers. According to the government spending watchdog, the National Audit Office, housebuilders built larger homes that they could sell for more because first-time buyers could borrow more money. A 2019 report from the watchdog found that the five largest housebuilders had built 50.4 per cent of all homes sold through Help to Buy. The scheme boosted their sales numbers more than 50 per cent, increasing their profits and share prices.
Most homes sold through the scheme were houses, most of which have risen in value, and helped the Treasury turn an overall profit of about £1 billion on repaid loans. But about 80,000 were flats, largely in towns and cities such as Birmingham, Bristol, London, Manchester, Milton Keynes and Southampton.
Across the scheme's duration, the average Help to Buy house owner's property had risen £33,666 (13.3 per cent) in value compared with what they paid for it when they repaid the loan, while the average flat owner made just £7,652 (2.8 per cent).
A key factor in the poor market performance of flats is that Help to Buy was only available on new builds. These usually come with a premium of about 20 per cent because they have never been lived in — but the shine quickly wears off. The stagnant market for flats means many have never recovered from that initial dip in value. Worries over fire safety, problems selling and getting a mortgage on flats with cladding issues and expensive service charges have also hit their values.
David Fell from Hamptons said: 'First-time buyer-friendly Help to Buy flats were disproportionately in bigger buildings that were more likely to have cladding or service charge issues than, say, a two-storey Victorian maisonette.'
When Sam Balsdon bought her one-bedroom flat in Bristol for £158,500 in April 2017, she had no idea fire safety issues would leave her stuck there eight years later. Balsdon, 35, who works in customer services for an insurer, chose Help to Buy as she had few other options as a solo first-time buyer.
Her flat wasn't perfect — the block has no parking and poor broadband access — but she loved it. That is until April 2020 when she discovered that the three-storey block of 20 flats had problems with its cavity barriers, a form of fire protection, and she was unable to get the flat valued to remortgage it. She had hoped to pay off her £31,700 Help to Buy loan at the same time as remortgaging.
She tried again in April 2022, in the hope things had changed as her Help to Buy interest-free period was coming to an end, but with the same outcome. Even a quick-sale company (which will buy your property at a reduced price if you can't wait to sell) that offered £135,000 pulled out when it learnt it was a Help to Buy flat, as it did not want to deal with Homes England. Help to Buy owners must agree a valuation with Homes England before they can repay their loan or sell.
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'That's when I really felt trapped,' Balsdon said. Since last October, she has rented out the flat for £1,100 a month, which loses her money after tax, mortgage payments and her £306 a month service charge, and has moved into her boyfriend's house until the issues are fixed and she can sell.
She said: 'It makes me really sad. It was one of my proudest achievements to buy somewhere on my own, and it's just turned into one of the worst decisions I've ever made.'
There tend to be fewer types of buyer for flats. While a house bought through Help to Buy might subsequently be bought by a family looking to upsize, flats tend to be favoured by first-time buyers — but since Help to Buy was only available on new flats, the resale potential was limited.
Landlords who may have once been interested are also fewer in number due to tax changes and higher mortgage rates, which have made it harder to turn a profit.
A third problem for sellers was that the market had been flooded by new flats over the past few years, according to Fred Jones, the chief executive of the quick-sale company Upstix. Flats bought earlier on in Help to Buy's lifetime, before safety standards were improved, might now be less attractive.
Jones said: 'Many of these flats are in large developments where new units continue to come onto the market. This creates a high level of competition, particularly for those who bought a few years ago and are now trying to sell into a much more crowded landscape.'
He said there had been a 'steady stream of inquiries' from owners of small flats looking to get rid. Many owners now face the unenviable choice of either being wiped out by selling at a loss, or staying put.
The Department for Housing, Communities and Local Government (DHCLG) and the Home Builders Federation, which represents developers, said the figures were down to the performance of the wider housing market. 'There is no evidence that buying a property through Help to Buy has an impact on its overall value,' the DHCLG said.