Government plans meet underwhelmed response

Measures announced by the government today to help first-time buyers and those struggling to pay their mortgages have not received universal support.

The Treasury revealed that stamp duty will be suspended for a year on houses costing less than £175,000. The move, which will save eligible homebuyers up to £1,750, only applies to buildings entirely for residential use.

Hazel Blears, the communities secretary, also unveiled a three-point plan designed to help first-time buyers and those struggling to pay their mortgages facing repossession. The measures included a mortgage rescue scheme to help the most vulnerable families at risk from repossession. She also announced a shared equity scheme aimed at helping first-time buyers, called Home Buy Direct, where government and developers would offer a loan of up to 30%, as well as bringing hundreds of millions pounds forward to allow social landlords and councils to build more affordable homes.

Liberal Democrat Leader, Nick Clegg, accused the government of “bribery”. He said: “Gordon Brown has produced a plan to save his job, not help people struggling with the credit crunch.

“If the Prime Minister really wants to help people on low and middle incomes he could take the simple and obvious step of cutting their taxes, releasing billions of pounds to boost the economy.

“The Government’s response is to try to bribe people into buying houses in a falling market. The last thing vulnerable first time buyers need is Gordon Brown sucking them straight into negative equity with the housing market in free-fall.

“The Liberal Democrats have consistently called for more help for those threatened with repossession, cutting energy bills and stopping irresponsible behaviour by banks. It is a pity that Gordon Brown only wakes up to the problem when his own job is under threat.”

Ray Boulger of John Charcol said it was too little, too late. He added: “The housing market has spluttered through the last few months with indecision on whether there would be a redefining of stamp duty clearly costing the wider economy. A suspension for one year on stamp duty for properties up to £175,000 is absolutely not the answer to the problem. Yes, it will help a small minority of people, but the issue lies more with mortgage lenders and their ‘shut up shop’ attitude to lending above certain loan-to-values. The government needs to address this situation above all others.

“This move will effectively move the current starting level up by £50,000, something that should have been done years ago, and little more than that. One has to question whether the government has truly thought this through. John Charcol has calculated that a total suspension of stamp duty would only have cost the government less than £2 billion a year which we would argue is a small price to pay in order to ensure a fair playing field for all, breathing life into the market, let alone their own flagging reputation.”

The Association of Home Information Pack Providers (AHIPP) has welcomed the suspension of stamp duty on properties up to £175,000, although the amount falls short of the £200,000 that the Association suggested back in June.

AHIPP has also welcomed the announcement of Home Buy Direct that will be run with the larger property firms and also the assistance for existing home owners having problems with their mortgage payments.

Mike Ockenden, director general of AHIPP, said: “The announcement of measures to help the housing market in these difficult times provides much needed clarity for homebuyers. Whether these measures will go far enough, only time will tell and indeed AHIPP would have liked to see a higher value attached to the stamp duty suspension and for a shorter period of time. It is the case that this measure in the past has made its greatest impact towards the expiry date which means that it may well be the summer of 2009 before the full benefits kick in.”

James Hyman, partner for residential sales at Cluttons, said: “This morning’s announcement will finally resolve the stamp duty fiasco that has hovered over the housing market in recent weeks. It is a huge relief that the uncertainty surrounding stamp duty has been removed, as rumours of a total suspension of the tax had an immediate and detrimental impact on the whole market.

“However, the change in the stamp duty threshold to £175,000 offers little benefit to the majority of homebuyers, as it falls far below the average property price in most regions of the country. This proposal is woefully inadequate and the industry deserves more, given the damaging effect of the stamp duty rumour mill.

“The proposed £300 million shared equity scheme is the most positive thing to emerge from the Government’s rescue package. This could go some way to help kick-start the building trade, easing some of the financial pressure currently facing developers and giving them greater access to buyers who are struggling to enter the new homes market.”

Housing market delay ‘spells end for Labour’

The Labour Party will suffer a landslide vote against it unless it intervenes immediately to stem sinking activity in the housing market, according to Wolsey Securities. The housebuilder finance specialist says the number of housing transactions is set to total just over 400,000 this year; 60% down on the worst year of the 90s housing market crash.

It says transaction levels are “dangerously low”, adding a number of housebuilders are on their knees and will fold unless there is an improvement.

If the Government takes action now to introduce a stamp duty holiday and implements a loan deposit scheme for first time buyers, then buyers will re-enter the market and builders recommence construction, it says.

Mike Ratcliffe, chief executive of Wolsey Securities, says: “The Government must step in and take action now.

“Waiting until the autumn, whilst the stamp duty speculation continues to rumble on, will have a devastating impact on the economy.

“If the Government fails to act, it will ultimately be responsible for its own demise. There will be a landslide vote against the Labour Party when the next General Election takes place, if they continue to lead the nation into a recession and decimate the housing industry from which so much has been expected.

“The target of 240,000 new homes per annum by 2016 is now impossible. The nation is also facing a severe housing supply crisis.”

However, Ratcliffe says there are indications the decline in the housing market is bottoming out.

“In the last few weeks there have been signs that the housing market’s deterioration was slowing with a number of key indices, including the Halifax, showing a slow down in price falls,” he says.

“Our own portfolio of over 2,500 units has also shown a slight uplift in reservations. This could well be the first indicator that we have reached the bottom of the market. With transactions at an historic low level the only way now can be up.”