As readers of my blogs will know I welcome all forms of government assistance to the property market. I am extremely disappointed by two recent announcements from the Scottish Government which I think are more smoke and mirrors than any real substance. The first is the planned Stamp Duty Tax cut to kick-start the housing market. When John Swinney unveiled his plan he advised this would kick-start the housing market and help more young people become home owners by wiping out the 1% tax for properties valued at less than £180,000. The key problem to the Scottish housing market is the lack of support for first time buyers. The average first time buyer property is less than £125,000 and therefore Stamp Duty does not figure in the equation for the vast majority of first time buyers. I think the government is wasting a great opportunity to actually assist the housing market. The other announcement unveiled was the ending of right to buy Council and other rented housing. I would ask the Scottish Government to consider the following four point plan: –
- A first time buyer scheme with the government acting as guarantor for 10% of a first time buyer mortgage. The first time buyer putting in 5% and a lender lending 95% mortgages at 85% mortgage rates. This would have such a positive impact on the whole of the Scottish housing market and the economy in general and the government would not actually be spending any money unless the guaranteed mortgage went bad and the lender was unable to recover their 95%. The default rates on first time buyer mortgages are actually very low so in a very simple measure the government could have a real impact helping first time buyers onto the property ladder.
- Increased funding for housing associations and encouragement of a right to sell policy with the caveat that all money raised by property sales are used by the housing associations to build new properties.
- Tax breaks and incentives for property investors. There is an excess of low-end properties on the market that are not shifting due to the lack of first time buyers and there is a dangerous property rental bubble developing with rents increasing at an incredible rate and way above the rate of inflation. Encouraging property investors to buy these properties and get them onto the market for rent would assist the property market as a whole and would also enable through supply and demand a cooling down of the property market.
- Abolish the Home Report which is an expensive block on people putting their houses on the market.
If this four step plan was adopted we would see an immediate improvement in the housing market which would benefit everyone and I will continue to campaign for this and keep you advised in relation to any changes.Lindsay Darroch Partner & Head of Property