HOUSING POLITICS
NEW TRICKS A cornerstone of the government strategy is the New Buy Guarantee, which indemnifies 95 per cent LTV mortgages up to £500,000 on new build (if lenders approve such mortgages). 100,000 mortgages will be made available. It is welcomed by the CML with one reservation; “a key assessment of the scheme’s success will be the extent to which house building and purchases under the scheme are additional to those that would have taken place anyway.” The CML notes that the banks are still
vulnerable to eurozone events, if the euro breaks up, the resulting crunch will reduce lending in any case. Instead of an indemnity, the CML asks, wouldn’t it be sensible to make investment in mortgage assets more attractive to institutions? Matt Griffith, spokesperson at lobby
group Priced Out, notes that since NewBuy only applies to newbuild, it’s irrelevant to most of the market – existing stock, and won’t make a difference to thousands of first time buyers who move into Victorian terraces. But he has a more serious objection to the scheme. “Propping up demand via subsidy keeps prices higher than they would be,” people are still priced out of ownership. In fact, NewBuy supports big housebuilders’ profit margins, rather than first time buyers. “They will use the schemes to adjust land banks, rebuild margins, and consolidate the market.” He’s also concerned that borrowers under NewBuy could end up with negative equity if house prices fall by less than 10 per cent. “It’s like a shopkeeper shifting overpriced stock by offering a clever
is cheap land. Unless land prices fall significantly, the margins do not add up.” Planning changes have been watered
It’s a complete damp squib. Builders will put all the rubbish they can’t sell into
the NewBuy scheme.’ TRACY KELLETT BDI HOMEFINDERS
financing scheme,” he says. Tracy Kellett isn’t impressed either. She
calls NewBuy “a complete damp squib”, which will only help housebuilders and not the property market as a whole. “I predict that builders will be putting into this scheme all the rubbish that they can’t flog any other way,” she says, buyers need to look this gift horse firmly in the mouth. Like Matt, she worries that first time buyers using NewBuy could end up with negative equity. That concern is echoed by Ray Boulger, at John Charcol, who thinks it could damage solvency ratios at lenders, too. That won’t help the buyers in the ‘squeezed middle’ who want to move up, but can’t do so without buyers for their existing property. Even if NewBuy didn’t have the problems, it’s not big enough. Jennet Siebrits estimates 1.4m potential first-time buyers have been kept out of the market in the last decade. 100,000 mortgages isn’t close to filling the gap. The government is also aiming to
Rates of building need to be doubled to be sustainable and meet growing
population needs.’ JENNET SIEBRITS CBRE
promote self-build (again, ignoring the existing housing stock). Matt Griffith says that on the margins, it might make a difference; self-build is now as high as 20 per cent of new building; it is 50 per cent in Germany. To get self-build to make a difference, the government need to create a “cultural shift”, he says, getting councils to release land in small plots and reducing the prices at which such land is sold. He believes housebuilders are making
more money from landbanking than they are from building houses. Just ten builders account for 50 per cent of production and they have a stranglehold on development sites. “The major barrier to housebuilding
down a little from the original proposals, but should free up land in both the public and private sector for development. However, while Shelter’s chief executive, Campbell Rob, thinks that the changes may deliver new homes, he says that because the requirement for affordable homes has also been relaxed, we may end up with only the top end of the market being catered for. The government returns to one of Mrs
Thatcher’s favourite policies with its decision to increase discounts for council tenants exercising their right to buy. However, given that the shortage of public sector rental accommodation, this doesn’t solve many problems, even though a one- to-one replacement ratio is being proposed.
NewBuy: irrelevant to the majority of the market, it just supports builders’
profit margins.’ MATT GRIFFITH PRICED OUT
MISSED OPPORTUNITIES Despite its good intentions, though, the government appears to have damaged the housing market irreparably in the Budget by removing the stamp duty (SDLT) holiday for first time buyers and imposing higher rates of duty on houses over £2 million. Paul Smee, director general of the CML, called this “disappointing”. Tracy Kellett believes the government should have extended the SDLT holiday across the board. “Partly, people aren’t moving because of economic concerns, which you can’t do anything about,” she says, “but also because of the costs of moving.” Stamp duty is a major part of this; in London, £1 million will only get you a small flat in Kensington, and there’s £50,000 to find for the tax, “one heck of a
PROPERTYdrum MAY 2012 9
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