Assetz® News - Policy proposal time

Policy proposal time

11th September 2008 |

If this week was the occasion for policy action in Washington as the US government airlifted Freddie Mac and Fannie Mae out of the rubble of the collapsing sub-prime market, the next few weeks will focus on politicians and bankers over here.

With this in mind, there have been a few people meeting those who govern us - or who wish to - with their own proposals for the UK property market, proposals that may greatly interest those investing in property.

At Westminster, it was Bank of England governor Mervyn King and some of his monetary policy committee colleagues who turned up to explain their position on various matters to MPs. Mr King hinted that an interest rate cut may be less than imminent given the likely inflation statistics that will appear next week. Mr King said: "It would be most surprising if, next week, I were not required to write a further open letter to the chancellor explaining why inflation is more than a percentage point away from target."

With the consumer prices index at 4.4 per cent compared to its upper target limit of three per cent, such a prediction may not come as any stunning revelation. Of greater interest may be the announcement that the Bank will announce next week proposals for a new liquidity scheme to replace the Special Liquidity Scheme launched in April. Such an initiative, it is hoped, may have a more substantial effect on the market than its predecessor.

Although everyone will have to wait a little bit longer for the details of the Bank's new ideas, the Federation of Master Builders (FMB) has introduced what it sees as five vital issues to help the housebuilding industry get back on its feet. Some, such as a reiteration of its existing proposal that VAT on home renovation should be cut from 17.5 per cent to five per cent, are of more relevance to those looking to improve their existing home rather than move up the housing ladder. On the other hand, the simplification of planning rules (which may help more homes to be built) and a proposal to introduce a graduated form of stamp duty may be more significant for buyers and investors. In the second case, the FMB argued that the new system would avoid a situation where a house price could just exceed a threshold of a higher band yet the extra percentage would be charged on the whole house's value. Under the FMB proposal the higher rate would only be levied on that part of the value exceeding each threshold, in the same way as income tax works.

The FMB passed details of these policies to the Liberal Democrat leader Nick Clegg. In some ways, this may seem strange since there is no serious prospect of the Liberal Democrats forming a government. But this party will be the first to hold its annual conference when it meets in Bournemouth next week, with housing and mortgage matters to be discussed on Tuesday morning. The FMB may well hope that the issues raised could see a snowball effect where they rise up the agenda as the conference season rolls on. Whether they do or not, policy discussions and announcements on property issues may be many in number this month.