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Prescott's low-priced homes "not so cheap"

4th November 2005 | back to article listings BACK    print this article PRINT

The government's plans to develop cheap housing to deal with the UK's shortage of affordable homes and improve the current property market may fail, experts have warned.

Deputy prime minister John Prescott has this week been unveiling the latest round of winners in the government's competition for developers to build a house for just £60,000, but sceptics have warned that many people will still not be able to benefit from them to get onto the first rung of the property ladder. Ministers have argued that the scheme is necessary to deliver affordable homes that will bring more first time buyers into the property market, thereby sparking a revival in the sector. While any such revival would be welcomed by investors, the concern from some experts is that, even at a building price of £60,000, many people will still be priced out of the market.

This is because, while the building costs may be only £60,000, there will be other significant expenses to homebuyers. The Royal Institution of Chartered Surveyors (Rics), for example, has claimed that the bill for fees and profits could reach £20,000 per unit, so that by the time all considerations are taken into account, properties will still cost well above the £100,000 mark, pricing out far more first time buyers than had been hoped.

Such a position means that the housing market may not get the shot in the arm that many believe the new affordable homes would provide it with and the concerns that are beginning to spread now could fuel uncertainty in the market for years to come. The problem that all parties involved in the plans have is that the scheme is not even due to start seeing the development of properties until 2006, with many of the new affordable homes not being completed for a number of years.

Therefore, investors, builders and buyers alike have little way of knowing whether the houses will be truly affordable until they have been built. That is likely to result in great uncertainty in the market over the coming months and years until there are enough properties on the market to see if they are easing the housing problems.

An uncertain market is a potentially disastrous prospect for many investors, especially at a time when property prices have been suffering from some stagnation.

However, if the government is right and it's plans do genuinely get more first time buyers into the market, then the housing market could see a sharp increase, which would be of significant benefit to investors in the UK.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/2304.html. Alternatively, please see our full press release archive.

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