Assetz® News - Mixed response to government's housing plans

Mixed response to government's housing plans

24th March 2006 |

In addition to the welcome news on real estate investment trusts (REITs), Gordon Brown's Wednesday Budget was notable for a series of measures aimed at helping out first-time homebuyers.

The most controversial of these is the decision to raise the stamp duty threshold by £5,000 – controversial only in that the vast majority of experts are suggesting it should have moved much higher.

While welcoming the general spirit of raising the threshold to £125,000, Linden Homes has argued it does not go far enough, saying that it will have "virtually no impact on the fortunes of first-time buyers".

The Royal Institution of Chartered Surveyors (Rics) has said it agrees with this sentiment, calling the £5,000 increase "derisory". It went on to suggest that the decision represents "a squandered opportunity", in that a £30,000 lift to £150,000 would have more realistically reflected current property prices.

Ian Randall, managing director of Linden Homes South-East, said: "First-time buyers are the life blood of the housing market and any initiatives from the government to give them a leg up onto the housing ladder will be beneficial to the wider market."

With this in mind, he would have much preferred to see the stamp duty threshold pushed up even further, but he is pleased with a number of other government proposals.

The chancellor, for instance, said that he will give £970 million to help around 35,000 first-time buyers onto the property ladder, by co-funding a quarter of the property price leaving only the final three quarters to be funded exclusively by the buyer.

Another scheme is to be piloted that will see three quarters of the purchase fee funded, although there is no guarantee that this will find any lasting impact.

The strength of property investment in the UK, as across the world, is very much reliant on a solid foundation of first-time buyers. With house prices continuing to rise, investors are still finding they are making good returns, but there are some lingering concerns about the sustainability of the growth if first-time buyers are forced away from the market.

Although he is disappointed that the stamp duty threshold is still well below the average price paid by a first-time buyer, Mr Randall is encouraged by the moves made to bolster the property investment business at its very roots.

At the other end of the scale, the early indications are that REITs will be exceptionally popular in the UK, with the Association of Investment Trust Companies finding that 40 per cent of sophisticated investors are considering investing in a REIT.

A further 35 per cent view REITs as a low-cost way of gaining valuable access to the lucrative property market, while 27 per cent believe that REITs are a safer bet than investing directly in property.

While the attempts to help first-time buyers perhaps fall short of expectations, Mr Brown's Budget clearly includes a lot that has pleased the property investment industry and experts are now looking forward to increased activity as the measures come into effect.