UK Plans To Help Housing Market

Today the British government offered some help to home owners in this trying time where house repossessions are up and confidence in the housing market is particularly low.

The help on offer will help some families stave off what could be a potentially disastrous end of year. As mortgages get harder to find, as people sit tight hoping that the market falls further, and those who wish to sell find it harder and harder to shift their property, this package of help probably comes at the right time.

What Help is on offer?

Perhaps the headline most will see is the Stamp Duty Holiday proposed for those with properties valued under £175,000. This measure will help approximately 50% of home buyers across the UK, but obviously this will probably not be a measure that Londoners feel happy about as it discounts a major amount of property in London, the average price of a flat in Greater London, according to Land registry, is over £300,000.

Now that’s the average, we know that there are variations within that average house price figure and that certain boroughs in the capital skew that figure to the higher end. Someone who is still looking for a house for sale for under £175,000 in London is going to find it very difficult unless they manage to pick up a property from a very motivated seller in dire need of funds.

Who are the Motivated Sellers?

If our news reports are to be believed, currently the most motivated sellers would be the banks and building societies that are repossessing houses at a rate that whilst less than the number experienced in  the early 1990’s when the UK housing market saw it’s last major decline, is still markedly up on this time last year. The Council of Mortgage Lenders (CML) reports that there were 18,900 property repossessions cases in the first half of 2008. This compares to 12,800 in the first half of 2007 and 13,400 in the second half.

I would argue that there is probably another group who are even more highly motivated sellers than the banks and building societies. These are the large commercial house builders who ploughed ahead with more and more housing developments, especially in areas of the north and west Midlands, such as Manchester, Birmingham and certain areas in southern England.

Areas of Kent that expected the high speed rail links to come through their towns saw major investment and property price rises. Places like Ashford lost out major when the high speed rail link eventually passed them by but didn’t stop. These commercial house builders have been feeling the pinch of the credit crunch and are offering more and more deals to entice buyers, including offers based on paying legal fees, stamp duty and even providing payment holidays.

Any Shared Equity or Social Housing Offers?

Shared Equity scheme are on offer, but quite what this scheme will offer is still up for grabs, but this is being offered through registered social landlords so this means it will only be available to those who qualify for social housing assistance. Not being funny but when was the last time you managed to get a look in on one of those? especially since we stopped building council accommodation during the 1980’s and moved all the council housing stock over to housing associations. Most people who have a job that pays over £15,000 per annum wouldn’t qualify for social housing, so this package won’t really help those already in a property they want to sell, it won’t help those who have been saving their mammoth deposits, by living at home with their parents to save money. It doesn’t seem like there’s a piece of that pie for many of the UK’s wannabe house buyer population, however one glimmer for those who want to get on the housing ladder for the first time is the Homebuy Direct scheme.

This is an offer to 10,000 first time buyers who are currently unable to buy for soe reason the chance to participate in the £300m scheme. Here people who’s income is under £60,000 per annum could qualify for up to 30%. This is an interesting one which has probably the most potential for those who have some deposit and are looking for new homes to buy (as first time buyers) The equity loan on offer is part funded by Government and part by the developer. It would be interesting to note industry reactions to this, and to further ascertain whether this 5 year loan is free, free or whether interest is accrued during the period and added on once the free period is over.

Does this package have something for everyone? Probably not, but it’s meant in part to bolster and provide support for people at the most vulnerable end of the market buy or keep there homes. It’s also meant to have measures to help stabilize the market from the point of view of solving our housing shortage problem by providing more options. Will the package help stave of a house market crash or house market recession, that remains to be seen.

We don’t think that house repossessions will slow given the current economic conditions. The UK is facing a recession, as oil and food prices rise, people feeling the pinch are  staring at a long hard winter. How the UK housing market will fair come January/February 2009 is anyone’s best guess.

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