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U.K. Help-to-Buy Program Is Lifting Economy, Morgan Stanley Says

March 11 (Bloomberg) -- The U.K. government’s Help-to-Buy program aimed at lifting the housing market is providing a bigger-than expected boost to the economy without creating a bubble, Morgan Stanley said.

Analysts and economists underestimate how critical the Help-to-Buy policies are for construction, credit and Britain’s broader economic recovery, Morgan Stanley research analysts said in a note to clients yesterday. The government should consider extending part of the program, they said.

“A housing-market revival has clearly been a significant boost to the U.K. economy by encouraging homebuilding” and through a likely positive impact on consumption, Morgan Stanley said.

Prime Minister David Cameron’s bid to stimulate the economy through the housing market is yielding results as U.K. builders ramp up construction to satisfy demand. About 30 percent of newly built homes in England are funded by Help to Buy and there could be as much as a 40 percent to 55 percent increase in housing starts, Morgan Stanley estimates.

Part of the Help-to-Buy program enables purchasers to take out a loan with a down payment of as little as 5 percent on homes valued at as much as 600,000 pounds ($1 million). Critics including the International Monetary Fund and U.K. Business Secretary Vince Cable expressed concerns that the policies will result in a property bubble.

Morgan Stanley said its latest data shows no evidence of a bubble and “prices are clearly not being affected as much as first feared.” About 80 percent of activity is outside of London and southeast England and more than 80 percent of transactions involve first-time buyers with modest incomes, according to the report.

To contact the reporter on this story: Jeffrey St.Onge in London at

To contact the editors responsible for this story: Andrew Blackman at Ross Larsen

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