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Stamp Duty Change Targets First Time Buyers

The government has announced that for one year, stamp duty tax will not apply to properties sold for £175,000 or less.

The Treasury stated that: "this will provide an exemption from stamp duty land tax for land transactions consisting entirely of residential property where the chargeable consideration is not more than £175,000.”

The relief will apply from now until September 3, 2009 and the announcement ends the speculation from August that the government was considering a stamp duty suspension.

SH Note: Talk about too little, too late. Lobby groups have had to respond to this with the politically-correct “cautious optimism” (more on this below) but estate agents have largely ridiculed the move and when leading property journalists mock the government’s efforts, then we all know how bad it is.

The Government Thrashes Out Extra Measures to Boost Market

Other measures aimed at boosting the market include "free" loans of up to 30 per cent for first time buyers in England.

Households earning less than £60,000 will be offered loans free of charge for five years on new properties, co-funded by the state and developers.

The loans system, called HomeBuy Direct, is to be run together with big housebuilders.

Once the five-year "free" period is up, homebuyers will be asked to pay a fee, the Department of Communities and Local Government (DCLG) said – although no more details of this were provided, although a spokesman added that "hundreds of millions of pounds" had been put aside in the last Budget for such a move.

In a statement, the DCLG said: "Not only will HomeBuy Direct help first-time buyers, it will also support the industry by identifying buyers for their new homes. This will help the housebuilding industry weather difficult conditions, so that, when the market recovers, they are ready to expand and get back on with building the new homes the country needs for the long term."

For existing homeowners who can no longer afford mortgage payments, the government says councils or social housing landlords can pay off the debt and instead charge tenants rent "at a level they can afford".

The DCLG is also promising to "bring forward funding for social housing from existing budgets, delivering more social homes sooner".

Housing Announcements: The Reaction

Various groups connected to housing have delivered their views on the Government’s announcement. Here they are:

CML:
"Essentially this package is directed at the blockages in the housing market for some vulnerable consumers," said director general Michael Coogan. "This is welcome, but until more funding is available we are still some way from restoring long-term stability to the housing and mortgage markets.

“But we welcome the announcement of reforms to Income Support for Mortgage Interest next spring, where the waiting time for new claims is being cut from 39 weeks to 13 weeks, and the upper ceiling for the size of mortgage that will be met is being raised to £175,000.

“The mortgage rescue proposals for some borrowers who would otherwise become homeless, while also welcome, will help only perhaps 6,000 households over two years. The new shared equity product to help first-time buyers will be useful for a particular tranche of would-be home-owners who genuinely wish to enter the market now. The proof of the pudding will be in its uptake.

“The stamp duty concession for properties under £175,000 is something of a curate's egg – good in parts."

RICS:
"The government has failed to listen to the property industry and respond to market pressures and their proposed measures will have little impact on those suffering as a result of the current crisis," said spokesman James Scott-Lee.

"Action to increase lending by improving liquidity in the mortgage market is essential as part of a coherent package of measures alongside help for first-time buyers and protection against repossession. Without making it easier to get a mortgage, the government is doing no more than tinkering around the edges of the housing market downturn."



 

Shelter:         
"The package of measures shows the government is listening and trying, and taking all the steps that it could," says chief executive Adam Sampson.

"However, what has been announced will still be dwarfed by the massive scale of the housing crisis, and will be very limited in helping enough homeowners to turn the market around. The package will only really help about 15,000 people in total, but with 45,000 set to be repossessed this year, hundreds of thousands priced out of the market and millions stuck on the council house waiting list, the help the government is offering doesn't go far enough."

TUC:
"This is active government at its best – a welcome package of measures that targets help effectively on those who need it the most," said general secretary Brendan Barber.

"It will increase the supply of social housing, help those threatened by repossession and provide a real boost to low and middle income first-time buyers. The ball is now in the court of the banks and builders to work with the government to make this package work."

SH Note: If the TUC welcomes it, we know we’re in trouble.

Mortgage Broker, Ray Boulger:
"It is much too little, it won't have a big impact. First of all, increasing the limit by £50,000 will only help a relatively small number of people. I think announcing it's going to last for a year is a mistake - because people will think, I can take advantage of this in six months time, so there is no need to rush."

SH Note: Boulger’s point about not setting a closing date for this Stamp Duty “holiday” is a good one and seems to have been missed by everyone else, not least, the Chancellor.

NAEA:
"We have been saying, along with others, that the Stamp Duty minimum should have gone up to £250,000," said chief executive Peter Bolton King.

"Bearing in mind the lack of sales going through this year, I wouldn't have thought the Chancellor would have lost that much more money by putting it up to £250,000. So it is a step in the right direction, but in all honesty, the whole Stamp Duty issue needs to be sorted out anyway."

London Estate Agents, Marsh & Parsons:
"It doesn't address the fundamental problem which is lack of liquidity in the mortgage market," said Peter Rollings, managing director.

"So even if one does want to buy a house, this now saves you £500, or one percent, which is something but it's not a whole lot. So it is a step in the right direction but, I think, quite a small step."

HBF:
"We welcome today's package as a positive set of measures to assist the housing market – and particularly the hard-pressed first-time buyer," said executive chairman Stewart Baseley.

"We have consistently called for a Stamp Duty holiday to assist market confidence and for action to help those seeking to get on to the property ladder, including a new shared equity scheme involving developers. However, we still also need action to tackle the current constraints on mortgage funding. This remains a critical part of the overall picture on which the ultimate success of today's measures depends."

CBI:
"The government has limited room for manoeuvre because of the poor state of public finances but they have sensibly targeted help with steps on social housing that are modest and useful," said director general Richard Lambert.

"The changes to stamp duty, however, may turn out to be largely symbolic and will not be cost free."

Darling’s Announcement Boosts Share Prices

Housebuilder shares soared after the government launched plans to resuscitate the market – but analysts warned that any gains will be short-lived. Taylor Wimpey and Persimmon jumped more than nine per cent, while Barratt was up nearly seven per cent, Bellway six per cent, Redrow around five per cent and Bovis four per cent. 

House Price Slump Worse Than Feared

The housing market may now be destined for an even sharper correction than in the early 1990s, economists warned following new figures revealing the scale of the property slump.

The number of new mortgages approved by lenders dropped in July to 33,000 – the lowest level on record and a 71 per cent drop from last year, according to Bank of England statistics. However, economists warned that the figures would not necessarily prompt the Bank's Monetary Policy Committee to cut borrowing costs from their current level of five per cent this week.

The Bank's figures also revealed a pick-up in consumer credit, which may indicate that the most hard-pressed families are having to borrow more, or to curtail their debt repayments, as they struggle to keep their finances afloat.

Households' consumer credit, which includes credit card and overdraft debt, increased by £1.1 billion in July, compared with £906 million in June. Most of the increase was accounted for by overdrafts and other unsecured loans.

New Rules to Prevent Mortgage Fraud

New rules have come into force to stop mortgage lenders becoming the victims of over-inflated property valuations. From now on, builders must reveal if they have offered buyers incentives, such as cash-backs, fitted kitchens or paid-for legal fees.

The rules follow lenders’ worries that these incentives have led to some properties – particularly city-centre new build flats – being sold for more than they are worth.

The new rules for conveyancers have been issued by the CML and RICs and are supported by the Law Society, the HBF, Homes for Scotland and the Construction Employers Federation.

It means that developers of any newly-built, converted or renovated properties will have to complete a 12-question form, revealing to lenders and surveyors any incentives they may have given to buyers.

"Buyers, lenders and valuers have all been victims of the non-disclosure of incentives by developers with many buyers left with a mortgage worth more than the property's real value," said Barry Hall of RICs.

The CML’s Michael Coogan, said: “If developers ensure that they are transparent, and disclose any discounts or incentives on offer to buyers, lenders' confidence should start to return." 

The issue was first raised by the CML in February this year as the slump in mortgage lending started to grip the property market.

Edinburgh Approves 15,000-home Masterplan for Leith Docks

Edinburgh Council has granted planning permission for the largest development in its history by approving Forth Ports' 15,000-home Leith Docks development.

The outline permission is for a regeneration framework designed by architect RMJM that will include nine new interconnected villages across 58ha of brownfield land. The 15,200 new homes will be built over a period of 30 years, and will include up to 3,800 affordable homes.

The scheme will host a main terminus for the city's planned tram scheme. The framework also envisages 35ha of new open and civic space, public walkways and almost 3km of coastal boardwalk accessible for public use.

EP May Act as Broker in bid to Rescue Market

English Partnerships is looking to act as broker to get major institutional investors to prop up the ailing housing market.

The agency is talking to at least three major financial institutions and several large housebuilders about building homes that could then be purchased by investors and let to private tenants. The move is part of a package of measures being worked on by EP to stimulate activity in the housing market. Other ideas include providing developers with public money to finance developments and setting up a vehicle to redevelop EP-owned land.

The government is expected to announce in the autumn which measures will be taken forward.

A source familiar with the discussions said: “Many institutions haven’t touched residential before, but see an opportunity now.” 

However, a separate source close to the government said that although the idea of using EP to provide development finance was being discussed, it was at an early stage. “This is a bit of a long shot,” he said.

Alliance & Leicester Cuts Rates as Hint of Competition Returns

Alliance & Leicester has cut the rates on some of its most popular home loans – signalling that competition may be creeping back into the mortgage market.

This is the latest sign of revival and follows the lead of several other mortgage lenders who have trimmed their mortgage rates in the past two months in response to a decline in the cost of interest rate swaps. However, mortgage costs remain historically high, having risen sharply in the past year as banks stung by the credit crisis tried to conserve their capital and protect profits.

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