Tag Archives: financial
New powers for Bank of England regarding Help to Buy scheme welcomed
The Royal Institution of Chartered Surveyors (RICS) has welcomed a move to give further powers to the Bank of England to manage property’s role in the country’s economy. It said that the decision announced this week by the Chancellor of the Exchequer George Osborne is a responsible step when housing development is being heavily stimulated. But it warns that a ‘permanent’ Help to Buy scheme needs to be carefully considered. Whilst there is a commitment to annual scrutiny by the Financial Policy Committee, RICS has called for a concise and clear exit strategy for Help to Buy and believes existing schemes should be focused on those regions which are seeing least activity and development, and have the greatest housing need. Under the change the Bank's Financial Policy Committee (FPC) will make annual reviews of the scheme, starting next September. The committee had been due to make an assessment of Help to Buy only after its first three years of operation. Osborne believes that the recent recovery in parts of the housing market has raised questions about the impact of the scheme so he has given the Bank more control. The FPC will be able to modify parts of the scheme to keep it in check. The FPC will also be allowed to review the scheme and could reduce the £600,000 cap, so fewer homes are affected. The FPC could also make loans less attractive by recommending that the Treasury raises the fees paid by lenders for the guarantees. Help to Buy was originally launched to help buyers of new properties in England, with other schemes operating in Wales and Scotland. A second, potentially much bigger phase of the scheme is due to begin in January to assist buyers who might otherwise be unable to afford a down payment on a home. The scheme provides taxpayer insurance for up to 15% of a mortgage on houses worth up to £600,000, allowing banks to provide up to 95% mortgages at a reduced risk. The plan has been criticised by opposition politicians and private sector economists for risking pushing up house prices, which have since risen by around 10%. However, in its first assessment this week the Bank of England has given a clean bill of health to the Help to Buy mortgage guarantee scheme, saying it does not pose material risks to financial stability. It also said it was not to blame for prices risesas it only accounted for around 5% of mortgages and was most used in regions where house prices had risen least. 'The scheme does not appear to have been a material driver of (house price) growth. For example, take up of the scheme has been weak in London where house price growth has been strongest,' the FPC said, adding that mortgage lending standards had not deteriorated since the launch of Help to Buy, and house prices appeared to be cooling sooner than the FPC had expected when it last met in June and imposed caps on general… Continue reading
Flat prices have risen the most in the UK in last 10 years, new research shows
Flats prices in the UK have risen by more than twice the average for all properties in the last decade but most of the growth is down to increases in London, new research shows. The average price of a flat in the UK has risen by nearly £51,000 or £425 per month, from £157,172 in 2004 to £208,169 today, according to the research from the Halifax building society. The 32% increase in the average price of a flat is more than double the 15% rise for all residential properties over the same period. Detached homes at 12% and bungalows at 13% have recorded the smallest rises over the past 10 years. Whilst flats have increased most in price nationally since 2004, much of this rise is due to the performance of flat prices in London, where flats represent a relatively high proportion of the property market. Terraced homes have been the best performing property type in the greatest number of regions. These five are the North West, Yorkshire and the Humber, West Midlands, East Midlands and East Anglia. Semi-detached and terraced homes have remained the most popular types of property purchased over the past ten years. These two types represent 60% of all home sales in 2014; up from 56% in 2004. For first-time buyers, semi-detached homes have risen in popularity, accounting for 29% of purchases in 2014 compared with 25% in 2004. Detached sales have fallen from 21% of all property sales to 16% over the past decade. In the last five years prices have improved across all property types with flats recording the largest increase between 2009 and 2014 at 43%. Terraced properties at 31% growth experienced the next biggest rise. Bungalows have seen the smallest gain of 15%. The increase in flat prices nationally has been led by London with growth of 44% with a more subdued performance elsewhere in the country. All property types recorded substantial price falls during the housing market downturn between 2007 and 2009. Terraced houses fell 33% and flats were down 32% while bungalows fell by 21% and detached homes were down 26%. The report says that the tightening in credit criteria and the reduction in mortgage availability following the onset of the financial crisis made it more difficult for first time buyers in particular to enter the market. This helps to explain why terraced houses and flats, which are very popular with first time buyers, recorded the largest price falls during 2007 to 2009. ‘There has been a significant increase in the number of first time buyers since 2010 compared with a modest decline in the number of those moving home. This difference is reflected in a bigger rise in prices over the past five years for those property types that are most popular with first time buyers,’ said Martin Ellis, housing economist at the Halifax. ‘Since 2009, larger property types such as detached homes, semis and bungalows have underperformed flats and terraces. The demand for such properties has… Continue reading
UK property industry welcomes Help Buy extension, mourns lack of Stamp Duty reform
As expected the first phase of the Help to Buy scheme in the UK is to be extended and this move announced by the Chancellor George Osborne in his Budget speech in Parliament has been widely welcomed by the property industry. He also announced that from midnight anyone buying a property worth £500,000 or more through a company scheme will be subject to 15% Stamp Duty, reducing the threshold for the tax from £2 million. But properties that are rented out will not be affected. He confirmed that a new garden city will be built at Ebbsfleet in Kent and claimed that the extension of Help to Buy to 2020 will be accompanied by 120,000 new homes. ‘We’re extending the Help to Buy equity loan scheme for the rest of the decade, so we get 120,000 new homes built and we’re making further reforms to our planning system and offering half a billion pounds of finance to small house building firms,’ the Chancellor said. He also said that he would be asking the Financial Policy Committee to be ‘particularly vigilant over house prices. Some experts have suggested that the extension of Help to Buy could fuel a property price bubble, especially in London and the South East. But Osborne has been heavily criticised for failing to reform the Stamp Duty tax as a whole. It is widely regarded in the property industry as being unfair and in need of change. In particular organisations like the Royal Institution of Chartered Surveyors saying that the current slab system hinders rather than helps the property market recovery. ‘The much trailed extension of Help to Buy to 2020 is not a game changer. While it provides certainty and clarity to the market, creating another 120,000 new build properties is still a modest target. We need over 230,000 just to meet current demand. Much more needs to be done,’ said Simon Rubinsohn, RICS chief economist. ‘Yet again, the Chancellor has failed to overhaul the stamp duty system, with wages well below inflation and rents rising rapidly for years, many have been struggling to save for a deposit, let alone meet a huge tax bill. Helping more buyers to enter at the lower end of the market would have resulted in more movement and transactions, freeing up stagnant property chains and bringing badly-needed housing onto the market,’ he explained. He also didn’t think much of the garden city plan, calling it ‘a garden village’ and saying that even with other new homes being built the announcements will contribute only a little housing in the South East. ‘These numbers are a drop in the ocean and do nothing to help others in the UK. More importantly, they don’t deliver the mix of homes we need across society, from the private rented sector to affordable and social housing,’ he pointed out. ‘RICS has long called for an investors’ prospectus for garden cities, which we welcome today. But we need a more ambitious approach than 15,000 homes at a… Continue reading
