editor posted on April 21, 2011 06:25
The Budget has done little to help the housing market, some experts have said.
Although stamp duty changes are set to boost the buy-to-let market, the reform will chiefly benefit institutional investors rather than individual landlords. And critics widely denounced the flagship Firstbuy Direct scheme as being more about helping new homes developers than first-time buyers.
And all agreed that pressure is set to remain on the private rented sector.
Grenville Turner, chief executive of Countrywide, the UK's largest chain, said it was disappointing to see a lack of measures aimed at assisting the vast majority of home buyers. He said the large deposits currently required by lenders were keeping people in the private rented sector, with the number of tenants at a record high – and a 37% annual increase on people looking for private rented accommodation. He said the Budget gave no incentives to buy-to-let landlords.
The flagship £250m Firstbuy Direct scheme will help around 10,000 buyers, who will be earning under £60,000. They will contribute a 5% deposit and the Government and house builder will contribute 10% each. The buyer will then pay the mortgage on the remaining 75%.
But critics said the scheme would “not scratch the surface” of the problems faced by most first-time buyers and attacked it as an empty political gesture.
David Whittaker, managing director of Mortgages for Business, said: “The pool of buyers that qualify is so small you couldn’t even have a bath in it.
“If the Government thinks this is going to transform the property market they’re mad. The housing crisis will continue and it will be left to the private rental sector to pick up the pieces.”
Wendy Evans-Scott, President elect of the NAEA, said: “The Chancellor’s help for first-time buyers is a good gesture towards re-starting the stalling property market. However, it is nothing more than a gesture – the focus on new-build properties, rather than incentivisation across a broader spectrum of property, means there will still be little upward momentum in the market.
“While the measures aimed at first-time buyers must be welcomed, it is unlikely that they will provide the kick-start that the housing industry badly needs.
“Encouraging first-time buyers back to the market is an important first step, but it is just that – a first step on a long road to recovery.”
Nicholas Leeming, business development director at property portal Zoopla, said the scheme was merely window dressing.
He said: “First-time buyers currently pay an average deposit of £25,000, and this would plummet to an initial £6,250 – a very appealing prospect.
“But Osborne’s First Buy scheme won’t go beyond scratching the surface of the problem faced by the vast majority of first-time buyers as it’s exclusively for new-build properties and only around 11,000 buyers will benefit – a fraction of the overall number of potential first-timers.
“Mortgages are still required and this scheme leaves lenders, who have had a stranglehold on the market for the last two years, in a win-win situation.
“Being able to lend to a select group of first-time buyers without the normal level of risk makes lending to those who don’t qualify for the scheme even less attractive. And while the availability of credit is slowly easing, it is not easing fast enough to help those borrowers who don’t qualify. A step in the right direction these measures may be, but they’re merely window dressing the wider problem.”
Mark Blackwell, managing director of xit2, a software supplier for the mortgage industry, said: “The move is little more than a gesture and certainly won’t be market changing. The scheme does little to address the vast backlog of first-time buyers who are stuck in the rental market. There were £46bn of first-time buyer loans in 2007 and just £24bn in 2010, while the CLG says the number of households is growing by 223,000 a year, so this barely begins to scratch the surface.
“And the Chancellor isn’t committing an astronomical amount of money by any means – it will be funded evenly by the DCLG and the house builder. It’s not even a new scheme, it’s a direct replacement for Labour’s Homebuyer Direct Scheme.”
Charles Haresnape, managing director for residential mortgages at Aldermore, agreed: “This is more of a political gesture than a serious attempt to help hard-pressed home buyers. Last year, there were 194,600 first-time buyers – a dramatic reduction from 568,200 in 2001.
“The Government’s proposed scheme will help just 10,000 first-time buyers get a foot on the property ladder. It’s better than nothing, but we shouldn’t fool ourselves into thinking that, by itself, this scheme will kick-start the first-time buyer market into action once again.”
Neil Warman, chief commercial and finance officer at HML, a financial outsourcing company, said: “Only time will tell if the scheme will be successful, given the limited success of previous schemes to help people on to the housing ladder. My concern is that the cost of living, student debts, the threat of rising unemployment and reducing house prices may be driving a generational shift in the attitudes to home ownership.
“These issues are compounded by the lack of available mortgage products, the reasons for which are well documented.”
Richard Sexton, business development director of e-surv, said: “This week’s inflation figures have cast a dark shadow. The Chancellor had little scope to offer any meaningful respite to either home buyers or home owners.”
He added: “As if that wasn’t enough, we can look forward to interest rate rises that will hit existing mortgage holders hard, further encouraging them to batten down the hatches, while the higher tax and squeeze on benefits will only serve to act as a ball and chain on the property market.”
Also in the Budget:
Stamp duty charges will be changing, and reducing, for portfolio buyers of property. If the buyer chooses, the rate of stamp duty will be determined by the average value of the dwellings purchased (subject to a minimum rate of 1%), rather than their aggregate value as is currently the case. In other words, if an investors buys ten properties in one portfolio at an average value of £200,000 each, stamp duty will be payable at 1% and not 5%.
A Government review of stamp duty tax relief for first-time buyers will be published in the autumn.
The Government will introduce immediate legislation to crack down on stamp duty avoidance techniques which have been used to attempt to avoid tax on both residential and non-residential property transactions, including on high-value property transactions.
Borrowers facing difficulties in keeping up with mortgage payments will be supported by extending for a further year temporary changes to the Support for Mortgage Interest (SMI) scheme. The 13-week waiting period and £200,000 limit on eligible mortgage capital will now remain in force for new working age SMI claimants until January 2013.
Rob Wellstead, Managing Director Lenwell added: “Given that the Chancellor had no real room to manouevre and certainly no spare cash to play with, I believe the measures announced in the Budget in regards Housing are as much or more than could have been expected.
Whilst I agree that the Firstbuy Direct scheme will only scratch the surface of the market for first time buyers, it may encourage developers to start building new homes in greater numbers which will help overall supply.
The changes in stamp duty for portfolio buyers could make it significantly more attractive for portfolio landlords to acquire more property and therefore again, incarese supply in the private rented sector.”