The major cross-government package of new measures to meet current challenges in the housing market has received a mixed reception from the property industry.
Communities Secretary Hazel Blears said the 1 billion pound package is to help first time buyers struggling to get onto the housing ladder, support vulnerable homeowners at risk of repossession, and support the house-building industry.
The Chancellor of the Exchequer also announced that stamp duty land tax will not apply to purchases of residential property of 175,000 pounds or less.
In a third step, the Department for Work and Pensions (DWP) announced new support measures to help vulnerable homeowners meet their mortgage interest payments.
The British Property Federation (BFP) has questioned the effectiveness of measures which are only focused on home ownership, even though this may not be the best course of action for everyone.
Speaking to the BBC, the BPF said that the government should focus on stirring new development and dealing with the massive demand for rental housing by incentivising a large professional rented sector. In German, rental makes up 50 percent of the housing market, compared to 10 percent in the UK.
The BPF expressed doubts about the effectiveness of the new interest-free loan scheme being jointly funded by councils and developers, which would loan them a 30 percent deposit. Such buyers may yet have trouble raising funds due to being perceived as ‘sub prime’.
Ian Fletcher, BPF director for residential policy, said: “We welcome these announcements but question why so many are focused on home ownership when it’s clear that demand for rental housing is soaring.
“The country faces a number of housing crises and whilst this will target help at those home buyers in most desperate need, it will need to be augmented in the forthcoming months if it is to be seen as a truly comprehensive package.
“We need to look to Europe and develop a branded rental sector funded by institutions which would deliver truly affordable well-managed homes. Incentivising investment in build-to-let would cost the government practically nothing. We also need to revise the way stamp duty is unfairly aggregated (meaning that big investors pay more than they should) and look at how rental is treated for planning purposes.
The Council of Mortgage Lenders (CML) welcomes the integrated package of housing market measures announced and at the same time has urged the government to focus on the mortgage funding markets as much as on the consumer-facing initiatives.
CML director general Michael Coogan said: “Essentially this package is directed at the blockages in the housing market for some vulnerable consumers. This is welcome, but until more funding is available we are still some way from restoring long-term stability to the housing and mortgage markets.
“The mortgage rescue proposals for some borrowers who would otherwise become homeless, while also welcome, will help only perhaps 6,000 households over two years. Lenders must – and do – see repossession as a last resort.
“The stamp duty concession for properties under 175,000 pounds is something of a curate’s egg – good in parts. It will reduce transaction costs for some buyers, which is welcome. But we estimate that around half of all housing transactions will still be caught by stamp duty.
James Hyman, Partner for Residential Sales at Cluttons, said: “This announcement will finally resolve the stamp duty fiasco that has hovered over the housing market in recent weeks. It is a huge relief that the uncertainty surrounding stamp duty has been removed, as rumours of a total suspension of the tax had an immediate and detrimental impact on the whole market.
“However, the change in the stamp duty threshold to 175,000 pounds offers little benefit to the majority of homebuyers, as it falls far below the average property price in most regions of the country. This proposal is woefully inadequate and the industry deserves more, given the damaging effect of the stamp duty rumour mill.
Citizens Advice Chief Executive David Harker said: “We welcome the package of measures, particularly the cut in the waiting time and increased capital limit for Income Support for Mortgage Interest, reforms to the safety net for homeowners which we have been urging for some time.
“These could be an effective way of keeping people who lose their jobs suddenly and have no savings to fall back on in their homes. Helping people stay in their homes will reduce the risk of social exclusion that arises when families have to enter temporary accommodation, with children having to change schools before eventual re-housing, possibly involving yet another change of school for the children.
RICS spokesperson James Scott-Lee said: “The Government has failed to listen to the property industry and respond to market pressures and their proposed measures will have little impact on those suffering as a result of the current crisis. Action to increase lending by improving liquidity in the mortgage market is essential as part of a coherent package of measures alongside help for first time buyers and protection against repossession. Without making it easier to get a mortgage, the Government is doing no more than tinkering around the edges of the housing market downturn.
Communities Secretary Hazel Blears said: “This Government is committed to practical action to help those most affected by the current state of the housing market. We are working to make sure everyone struggling to pay the mortgage gets support and advice.
“We are giving a leg-up to first-time buyers keen to own a place of their own. And by bringing forward our investment in social housing, we are both getting more decent, affordable housing ready for people to live in sooner, and helping the house building industry weather tough times.”
Housing Minister Caroline Flint added: “We are determined to continue to do everything possible to promote long – term stability and fairness in the housing market.”