There has been a recent report from Realtytrac, an organisation which monitors repossession activity in the US, which confirms that the foreclosure crisis has spread across a wider area of the country and also shows an increase in foreclosures. This trend is the latest sign that the US foreclosure crisis is worsening as homeowners facing high unemployment, slow job growth and uncertainty about house prices continue to fall behind on their mortgage payments. My fear is that we, in the UK, may have a similar problem developing. The repossessions and insolvencies in the UK have not reached anticipated levels and my feeling is that this is because the banks know that if they did repossess or make developers insolvent, there is no-one out there to buy the property and they would just saturate and depress the domestic housing market. This does not mean that the problem has gone away, it simply means that the difficulties have been delayed.
This reinforces to me the urgent requirement for the UK Government to take action to bolster the housing market. I advocate a three point plan:-
- A fund set up to assist first time buyers guaranteeing deposits with the bank to allow first time buyers to get back on to the housing market.
- Change to the Pension Rules to allow residential investment properties to be included in pension portfolios – perhaps limited to say five properties or to a certain value. This again would assist the housing market, help with the pension crisis and also deal with the overheating rental market.
- Some form of fund to encourage banks to begin lending on residential developments.
I would fund the above proposals by changing the Capital Gains Tax Rules to tax heavily anybody that sells a property, other than their sole or main residence, within a certain period of time. I would also slightly tweak the stamp duty levels so that there were bands at £750,000 and also £1 million.
Unless action is taken now, I fear that the UK housing market will face the same issues as the US.
Head of Property Services.
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