Mon 11 Feb 2008
We can't ignore first time-buyers insists David Pretty
David Pretty, chairman of the New Homes Marketing Board, believes that a positive climate for first-time buyers is essential for our national social, economic and political wellbeing.It’s a very difficult time to be a first-time buyer today.
After ten years of sustained house price inflation that have seen average prices rise by some 170 per cent, the first-timer has felt close to being an endangered species. The number of first-time buyers entering the market is lower than for over 20 years.
But now, as the housing market slows, some commentators have suggested that more of those wanting to enter the market will be able to get their foot on the property ladder.
Normally, that might be the case but the current slowdown is different. It is very much tied up with the liquidity problems in the financial markets which are, in turn, leading the mortgage providers to reduce their range of products, cut back on lending multiples, reduce loan to value ratios – with the end of the 100 per cent mortgage – and increase fees. Nor – as the Bank of England reduces lending rates – will lower rates necessarily be passed on to borrowers as lenders seek to rebuild liquidity and reduce their exposure to ‘higher risk’ groups.
So, affordability remains a major problem if any benefit of a cooling market is offset by reduced availability and increased costs of borrowing and the need to find much larger deposits and meet additional up-front costs.
It is disappointing in this context that the Budget did not respond to my call to increase the threshold for Stamp Duty for first-timers to £250,000. Stamp Duty is a huge extra financial burden on young buyers already stretched to the limit. It adds at least £1,750 to a typical first home and over £7,500 in parts of London and the South East.
Increasing the threshold to £250,000 for first time buyers would take the vast majority of them out of this tax trap and provide a much-needed fillip to their stretched financial resources and the general housing market. I believe the threshold should be reviewed every five years to ensure it stays in line with inflation.
With the need for larger deposits, young people also need help to save for their first-home. We cannot simply rely on parental contributions for such help. The government should bring in a ‘national homes saving scheme’ where aspiring first-time buyers are encouraged to start saving early for their deposit – as much as five years ahead – and their savings are boosted by a tax-free contribution from government. A similar scheme was recently introduced in Australia. I believe we should also look at a measure of tax relief for parental contributions to first-time buyers.
This is an issue that we need to take very seriously. No housing market can be sustained without a healthy first-time buyer sector. A positive climate for first-timers is also essential, however, for our national social, economic and political wellbeing.
Posted by Show House
in Comment on Mon 11 Feb 2008
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