October 1st, 2013
In a week that saw David Cameron proudly announce that the second phase of the Governments Help to Buy scheme would be brought forward to further boost the market, fellow Conservatives have staunchly defended the plan and proclaimed the policy to be a chance for the economy to continue improving under their stewardship.
During his speech to the Conservative party’s conference in Manchester yesterday, the Chancellor George Osborne pointed to the fact that outside of London, growth in property values has been gradual, due to the inability of many to afford the level of deposit required by lenders to secure a mortgage. By bringing forward the second stage of the scheme, the Government plan to back higher lending with guarantees available from January 2014, with lenders now able to begin the process of accepting applications for loans in preparation.
While many objectors have based their criticism of the scheme on the claim that it could create a housing price bubble, the Chancellor was quick to suggest that those making such comments should consider they are in a position of financial stability and are likely to own valuable properties within the capital. Osborne stated: “Take your arguments to our great towns and cities where there are families who have saved for years, earning decent salaries, who can afford the mortgage repayments but can’t possibly afford the deposit being asked by the banks these days.”
His words will strike accord with many in the house building sector, who for much of the past 5 years since the onset of the financial crisis, have seen dwindling profits and a reduced demand for new property. The planning minister Nick Boles made comments on this point at a linked event to the Conservative conference, where in response to comments made by opposition party members about the potential of a housing bubble he said: “The difficulty is what would they do? If you are a house builder and private sector firm then you will only build houses if there is someone who is able to get the mortgage to buy it, it’s as simple as that.
“They are businesses not state-owned entities so they will only build if they can sell them and won’t build if they can’t.”
Boles continued to state that, “Help to Buy is not bubble policy but a critical part of getting our supply side planning reforms to deliver new houses. The only alternative strategy with any intellectual coherence is to nationalise house building by not expecting business to make money and organise it all from Government.”
Never one to miss an opportunity to comment, Boris Johnson has also added his own thoughts during his speech at the Manchester conference. Johnson added perhaps a more radical proposal with the suggestion that tax breaks could be considered for companies, to allow them to make tax-free loans to employees to allow them to build a deposit for a home.
Johnson said: “How many people here are owner-occupiers? Yes, no disgrace in that. But there are millions of people in London for whom that is simply out of the question. We will build 100,000 affordable homes over two terms; we have made available £3.6bn of public land.
”But we need to do so much more. We should consider allowing companies to make tax-free loans for rental deposits, as they can for childcare.”
Johnson went even further, by reinvigorating the often noted imbalance in the current “slab” system utilised for stamp duty in the UK. The argument made was that as prices within the capital are far higher than other parts of the UK, the increased margins past the £250,001 and £500,000 marks were prohibitive to many looking to buy for the first time or move. Mr Johnson directed his comments to the Chancellor when he said: “George, I hope I am not exceeding my brief if I urge you to look at the baleful effects of stamp duty in London, which is stamping on the fingers of those who are trying to climb the property ladder.”
Article By: Simon Butler, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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