First time buyers & the mortgage market

There is a lot in the press about the state of the British economy and with a General Election fast approaching this debate will increase.  I am surprised that at this stage there is not more discussion regarding the housing market and how best to stabilise it.  As a professional who is heavily involved in the property market it seems very clear to me and not open to dispute that our economic boom of the last few years was based on the increase in the value of houses.  Unless the housing market can be stabilised I do not think that the economy will ever get back onto a stable footing – certainly for the banks, once the housing market does stabilise, this will increase their confidence to start lending again.

One way of increasing this and one of the problems with the housing market at present is that it is very difficult for first time buyers to get a product.  It would be a brave political party that came up with a bold initiative to create a fund to help first time buyers get back on the market – why not force the banks to lend 90% to first time buyers with the Government guaranteeing the 5% over and above that meaning that first time buyers only had to find a 5% deposit?  This could be done at little risk if the lending criteria was correct, i.e. between 3 and 4 times salary and that there was a degree of affordability.  This would allow more first time buyers to get on the market thus stabilising the housing market and allowing the housing chain to get moving again.

Also what about again raising the idea of allowing people to use their pension funds to purchase buy to let properties, perhaps limiting the number of properties they can buy, this would then allow further funds to be injected into the housing market, stabilising house prices and again increasing confidence.

A way of funding this may be to introduce an enhancement to the Capital Gains Tax regime meaning that taxing people a higher percentage of the gain if they trade a property other than their sole or main residence within 5 years of purchasing, i.e. 70% after first year, 60% after second year and so on.  By assisting first time buyers to get on the market, the housing market will begin moving again, benefiting the whole economy.

The dreaded Home Report

I have read with interest some recent articles in the press regarding Home Reports.  Given that they have now been in place for over 12 months I found it very interesting that this debate is still continuing and perhaps more vociferously than it did at the time the idea was first mooted.  As a practising Solicitor with considerable experience in the property market I can honestly say that I have never come across a notion that has been so ill conceived and ill thought out as the Home Report.  It benefits no-one apart from Surveyors – apologies to all my friends who are Surveyors, although I fear that they themselves may come a cropper when the panels or nationals take control of the provision of Home Reports at the same cost to the client, taking considerable profit themselves and squeezing the Surveyors into providing Home Reports for much lower costs.

Home Reports were supposed to speed up the process – they haven’t – it now takes a lot longer to get the property on the market.  They were supposed to give a prospective purchaser more knowledge about a property at an earlier part of the process – they don’t.  Purchasers are people who rely on professionals, i.e. Solicitors and Surveyors, to guide them.  The Home Report is poorly laid out and the Solicitor is at a disadvantage not being able to speak to the Surveyor to get his comments by way of verbal report.  There is still the question of how much influence a seller or selling Solicitor has over a Surveyor.  There is a huge conflict of interest in the process in that the Surveyor is being instructed by the seller who is paying his fees but his report is being relied on by a purchaser.

Never mind the increased cost, the delay, the varying valuations, the Home Report was a concept that was not required.  Offers subject to survey worked fine – everyone knew where they were, prospective purchasers were taking advice from professionals who were able to give them guidance regarding values, banks felt more comfortable relying on surveys instructed after offers and if you were a seller who required to get their house on the market due to financial difficulties you are not being prejudiced by the expense of the Home Report.

A plea to the Scottish Government…

Please take a brave decision and scrap this silly scheme.

Home Reports – Your View: