Estate agents warn targeted approach needed to bring momentum back to housing market.
A leading online estate agent has warned that the UK housing market will remain ‘subdued’ unless the new government introduces more targeted help for homeowners and those looking to get on the property ladder.
CEO of My Online Estate Agent, David Grundy, believes programmes aimed at getting university students onto the property ladder, helping homeowners in negative equity and incentivising the bank of mum and dad are the key to breathing life back into the market. In addition, incentivising refurbishment of empty properties will also contribute to the need for more housing stock.
David Grundy said: “The housing market is nervous in the run up to the general election and the biggest fear is that May’s result will leave us with a hung parliament. This uncertainty will reduce whatever little confidence there is amongst buyers to zero and could bring the market to a complete standstill.
“Improving economic confidence is critical to building the market, and a minority government or looming second election will worry anxious buyers even further.
“Nervousness amongst sellers means instructions are already considerably down on last year, and although it’s clear the government has been trying for some time to stimulate activity with Cash for Lending schemes, it is struggling to find any real ways to inject confidence back into the market with such a generalised approach. The recent Help to Buy ISA announcement is to be encouraged, but the impact of this is years in the future – it may encourage savings, but won’t benefit the housing market until the end of the next parliament when savings have been accumulated. “
Grundy believes that to see real momentum return, any new government needs to introduce tailored schemes aimed at specific groups of buyers. He said: “Trying to rely on a ‘one size fits all’ generic approach has had very little impact on the overall housing market. To achieve real results we need to start targeting the people who have the potential to really drive things forward.”
According to Grundy, these include:
Bank of Mum and Dad
Encouraging parents to assist their children by gifting them the money needed to buy their own property will not only help their children but is also good inheritance tax planning for parents
Grundy said: “If parents genuinely have the money to offer their children, especially without having to borrow or lend any of the sum, then giving the money to children should be sensible inheritance tax planning, and would stimulate the first-time buyer market. The financial cost of a first home deposit is often an affordable sum for parents, but of great benefit to children.
“Under present rules, this gift forms part of the parent’s inheritance tax for seven years. By removing this potential tax liability the government would incentivise parents to support their children. In reality, the lost inheritance tax is a very low amount, and far outweighed by the benefits of clear and focused government encouragement.”
Empty property refurbishment
Previous governments have provided financial support to demolish and rebuild derelict properties. However, there still remain a significant number of empty properties that are suitable for refurbishment, and can be targeted for social housing and areas in need of economic regeneration.
Various incentives to registered housebuilders and renovators could include:
- Reduced purchase prices, if under local authority ownership.
- VAT exemption on energy efficiency. There is a 5% VAT rate applied to certain “green” products, but this needs widening significantly, to include double-glazing, external wall insulation and energy management systems.
- Stamp duty exemption for those buying such renovated properties.
- National Insurance exemption on recruitment of local apprentices employed on refurbishment projects.
Although there is a need for government financial support, there are wider benefits to the local economy and will also stimulate the construction industry as well as the housing market, ensuring the financial cost has multiple benefits.
Incentivise university and higher education students to get their foot on the property ladder by offering a two or three year moratorium on student loans when they take out a mortgage.
Grundy said: “Students are essential contributors to the UK economy and getting them on the property market early would be a significant step in the right direction. Thousands of graduates leave university each year with substantial debts to pay off, and this impacts their ability to take out a mortgage. It is clear that the student debt regime is not working, with a significant number never completely repaying the debt, and this needs to change.
“Offering assistance to ease this burden if they buy their own property could offer them a win-win solution and provide just the push they need to buy their first home. In essence, student loan repayments would be waived during the early years of a mortgage. This is the time when graduates are building their careers and are still at relatively low earning levels. By not having to fund student debt repayments they have more potential to fund a mortgage.
”Whilst there is a direct cost to the government of this scheme, it is essentially the same as if the student debt is written off later in an individual’s working life. Given this is increasingly common, the net impact to the taxpayer is minimal.”
Homeowners in negative equity
Thousands of UK homeowners are still in negative equity and don’t have the capital to put down a deposit to move. Whilst the financial burden of the mortgage may be manageable, given low interest rates, the ability to secure a new mortgage is a different story. It is now challenging, if not impossible, for buyers to get a 95% mortgage, meaning they are stuck in their current home unless they can save substantial sums or house prices rise.
Grundy believes introducing a new scheme could help homeowners raise a recommended 25% deposit to buy a new home. 5% would be put up by the homeowner and the other 20% provided by a second loan, but secured by a government sponsored insurance policy. The insurance policy would provide protection to the loan provider, with the one-off premium added to the value of the mortgage. In this way, mortgage providers can lend with sensible security levels, and the top-up provider has security from the insurance policy; from the individuals perspective the additional cost is spread over the life of the mortgage, so much more affordable.
All of this allows lenders to lend with confidence, and allows individuals to consider moving house, at no cost to the taxpayer.
Notes to Editors
MOEA is one of the UK’s leading and most established independent, online estate agencies – offering both Sales and Lettings services to property owners and landlords across the country.
It offers the same services offered by a typical high street estate agent, at a fraction of the cost and without compromising on reach – MOEA properties are advertised on all the major portals such as Rightmove and Zoopla.
The significantly lower prices are deliverable as the business does not have expensive property and ancillary costs. In addition, a focus on the use of technology allows operations to be delivered in a more efficient manner. Despite operating on a national basis, a country-wide network of property assessors ensures Sales instructions receive a local service.