Readers will know that a theme of previous blogs has been the problems faced by first time buyers. I was very interested to read the annual Shelter Affordability Index which shows that despite the impact of the recession on house prices and historically low interest rates, becoming a home owner in Scotland is 75% harder than it was 15 years ago. Whilst I don’t agree with some of the proposals by Shelter in respect of home ownership, which I believe is fundamentally important to our society, I do think that now is the time to implement policies that promote and assist first time buyers in getting onto the housing ladder.
Recent lenders who have put deals out to the market place for first time buyers have been astounded by how quickly these deals have been snapped up. This shows the demand and the necessity for the Government to act now.
If we cannot get first time buyers onto the ladder then the Scottish property market will become unsustainable, with knock-on effects to the wider economy.
My initial feeling on the Chancellor’s Emergency Budget of 2010 was one of a lost opportunity. I think the news management by the Government over the last couple of weeks was very successful and my personal feeling was that the pain was not as much as I had anticipated. I was sure that Capital Gains Tax would increase, I thought that there might have been some developments with Stamp Duty and I thought that VAT may have gone to the 24% mark. However, in terms of the property market, I think that this has been a wasted opportunity. Where were the initiatives to help the first time buyers? Where was the initiative to increase investment into refurbishment of existing housing stock? Where was the assistance for the developers and builders to enable them to start building again?
I was filled with dismay at the levy imposed upon banks as whilst this certainly played to the popular press the banks will recoup this money leading to more expensive charges for mortgages, and other bank products.
Leading on from the banks, I was also disappointed to listen to the Chancellor’s mansion house speech the day before. As I have mentioned in previous blogs the way of controlling an overheating housing market is to be more innovative in your use of Capital Gains Tax. It is not to limit mortgages. Limiting mortgages will simply limit competition amongst lenders making borrowing more expensive, stifling the housing market and curtailing economic growth. In relation to the housing market the Budget of June 2010 was a wasted opportunity.
Two reports today show conflicting messages about the housing market. The Department for Communities and Local Government said prices in April were 10.1% higher than a year ago. This ties in with the increased demand that is starting to filter through in terms of transactions. However, separate figures from the Council of Mortgage Lenders show that mortgage lending this year has been modest. The number of loans granted to homebuyers fell by 9% in April to 40,000. However, lending was still 15% higher than a year ago. The big problem shown by the CML report is that first time buyers are still finding it very difficult to get higher loan to value mortgages. First time buyers traditionally have lower deposits. With question marks over what the Chancellor will do on 22 June in respect of Capital Gains Tax I still expect more mixed messages as far as the property market is concerned. My view is that we are still moving in the right direction with a few bumps on the road to be crossed.
Chancellor – please do something to help the first time buyers in particular and the housing market in general on 22 June.
Scottish Government – please abolish the Home Report.
I apologise for the delay in getting this blog to you, but this is probably the best example of the increase in activity in the property market that has been seen by me since the beginning of April.
At the start of the year I had been predicting growth in terms of the number of properties coming on the market anticipating a 10% increase from last year with sales following a similar pattern of increase. Currently with 4 months in (1st February to end May) this figure is currently holding at more than 40% of an increase. This is very positive and a figure that I will continue to monitor. My view is that as people are still prepared to put their houses on the market then you can see that there is pent-up activity and there are people who are wanting to move house for whatever reason. Readers of previous blogs will know my views on the Home Report but at least with the upfront cost we can guarantee that the people who are putting their houses on the market are genuine sellers.
The recent prediction from the Halifax which shows prices dropping because of increased volume ties in with the figures that I am seeing for the East of Scotland. My feeling is that because of the differences in the Scottish system and the underlying shortage of property, we will not see the drop in prices predicted by the Halifax but we should see a levelling off in price growth as numbers of properties coming on the market increase giving people more choice. I will keep you up to date with the statistics as I get them.