21st April 2010

Election effect on property market

Recently I was asked what effect I thought the General Election would have on the property market. The question was brought about by the heady excitement and much discussion of the recent leaders’ debate. My experience is that after a very slow start in January and February, the number of properties coming on to the market in the Dundee and Angus areas, whilst not quite reaching the boom levels of 2006/2007, are extremely good and way ahead of 2008.  The National Association of Estate Agents’ March report indicates that this is a pattern that is repeating itself throughout the whole of the UK.  Sales are also starting to follow this activity with an increase in the number of closing dates and many prices exceeding Home Report valuations.  My feeling is that the housing market is building up a momentum of its own and is not paying much attention to the General Election.  The economists seem to be indicating that whilst the UK economy remains weak, the threats of a double dip recession seem to be receding and yesterday the Council of Mortgage Lenders announced that there was a 24% rise in mortgage lending in March compared to February and the figure was also up on 3% on March last year.

It was disappointing that the property market was not discussed during the leaders’ debate and I would hope that this topic is covered in their final debate about the economy, particularly in relation to first time buyers.  Looking back to the end of the recession in the early 90’s, the property market stagnated due to the absence of first time buyers. With the current lack of mortgage finance and the need for very high deposits, I fear that this is a trend which may be repeated. My plea to the political parties is that they grasp this issue as first time buyers are fundamental to the growth of the housing market.  My suggestion would be for a Government backed scheme where banks lend the first time buyer a mortgage up to 95% with the Government acting as a guarantor for 10% of that mortgage. This would be for properties up to £150,000 and would only relate to first time buyers as per the recent Inland Revenue definition. The risk to the Government would only be if the person defaulted and with tighter restrictions, this should be minimal.  The scheme could be funded by changes to the Stamp Duty regime (perhaps adding an extra band for properties worth more than £2 million) plus changes to the Capital Gains Tax rate for people selling properties other than their sole or main residence within a 24 month period.

Unless more help is given to the first time buyer there is a danger that a whole section of property will go into stagnation both in terms of value and also condition and this will have a negative impact on the property market as a whole.



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