Mixed reaction to Government's housing market rescue plans

Published by Jon Land for 24dash.com in Housing

There has been a mixed reaction to the Government's housing market rescue plans unveiled today.

The UK's biggest mortgage lender today welcomed the Government's announcement that it was abolishing stamp duty on properties worth up to £175,000.

The move means anyone buying an averaged priced house is likely to avoid having to pay the tax, relieving some of the pressure on hard-pressed first-time buyers.

A Halifax spokeswoman said: "We welcome the Government's stamp duty initiative. This is a sensible measure and it will help the housing market."

The latest house price figures from Nationwide Building Society put the average cost of a home in the UK at £164,654, below the new stamp duty threshold.

But the Council of Mortgage Lenders said the move did not go far enough.

Spokeswoman Sue Anderson said: "While any initiative to try to help the housing market is welcome, this particular move doesn't go far enough in terms of the starting threshold and it is also getting close to the £250,000 threshold.

"The level of transactions this year is lower than last year and, while it means that around 40% of transactions won't be caught (by stamp duty), it is questionable whether it will incentivise buyers who wouldn't have entered the market anyway."

Ray Boulger, senior technical manager at John Charcol, agreed that the move would not give the market a significant boost.

He said: "The only good thing about the announcement is that it has cleared the air."

He said the only people who were now likely to enter the market as a result of the change were those who had delayed making a purchase following the rumours that stamp duty would be suspended.

He said: "The gap between the thresholds is now ridiculously small, and I think people will be even more reluctant to pay over the £250,000 mark.

Stamp duty is currently charged at 1% on properties sold for between £175,000 and £250,000, with the tax jumping to 3% above this level, before rising to 4% on homes worth more than £500,000.

The National Federation of Builders dismissed the Government's housing package, including the measures for England announced by Communities Secretary Hazel Blears, as as being "little more than a political sticking-plaster".

Spokesman Roger Humber said: "Today's proposals do not address the core problem, which is the collapse in mortgage availability.

"This is what has triggered the crisis for first-time buyers and led to low levels of housebuilding and rising unemployment in a housing market operating 70% below last year's level."

He called on the Government to urgently address this problem.

Housing charity Shelter's chief executive Adam Sampson said: "The package of measures shows the Government is listening and trying, and taking all the steps that it could.

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

"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."

Michael White, a property lawyer at London-based law firm Dawsons, said: "The stamp duty proposals announced today will not make one iota of difference to the state of the UK housing market.

"If there are no competitive mortgages available then knocking a maximum of £1,750 off a purchase is a complete and utter waste of time."

He added: "Take London for example where the average property is worth around £375,000. I can't imagine the seven-and-a-half million or so people living in the capital are going to be jumping for joy at today's announcement."

Building workers union Ucatt called on the Government to demand that housebuilders directly employ staff and train apprentices, in return for the assistance they are receiving, claiming that housebuilding was the most casualised and dangerous construction sector.

General secretary Alan Ritchie said: "Sadly our initial fears about the housebuilders are coming true. It is apparent that they are using the credit crunch as an excuse to sack workers and then hire new staff on a false self-employed basis.

"They are sitting on huge land banks and once the market recovers they will use a further casualised workforce to boost their profits. The Government, which is shoring up the industry, should use its influence to block this approach."

A Nationwide Building Society spokeswoman said: "Nationwide welcomes initiatives designed to support borrowers and the housing market.

"We look forward to reviewing these proposals in further detail and are committed to working with the Government and the industry on measured responses to the current conditions."

But Liberal Democrat leader Nick Clegg said: "Gordon Brown has produced a plan to save his job, not help people struggling with the credit crunch.

"If the Prime Minister really wants to help people on low and middle incomes he could take the simple and obvious step of cutting their taxes, releasing billions of pounds to boost the economy.

"The Government's response is to try to bribe people into buying houses in a falling market. The last thing vulnerable first-time buyers need is Gordon Brown sucking them straight into negative equity with the housing market in free-fall."

Peter Bolton King, chief executive of the National Association of Estate Agents, welcomed the statement on stamp duty, as he said the uncertainty had been putting many people off entering the market.

He said: "We have been saying that it was absolutely crucial for the Chancellor to come out and say something about stamp duty.

"If this is all they are doing at least it is something, but it isn't what we were asking for, which was a stamp duty holiday across the board. £175,000 is still too low."

Leonie Kerswill, tax partner at PricewaterhouseCoopers, said the move was unlikely to help first-time buyers living in London.

She said: "This is wonderful news for those struggling to get on the housing ladder not least because it will bring to an end the speculation of 'what might be' that has affected activity levels in the residential property market.

"However, the nature of stamp duty means that this doesn't help those buying more expensive properties.

"For those living in areas with high property prices such as London, with the average house prices well over the £175,000 bracket, buyers will still have to find the stamp duty - more usually at 3% or 4% - on the whole purchase price."

The National Housing Federation welcomed the Government's mortgage rescue scheme as a way of saving thousands of households from having their homes repossessed.

Ruth Davison, the federation's director of campaigns and neighbourhoods, said: "It will mean that many people at risk of being thrown out of their own homes will now be able to turn to a housing association for help.

"It will be fair, transparent and just - and will help ensure that thousands of families will be spared the stress, trauma and misery of repossession.

"This scheme will also serve to undermine those shadowy companies currently making money out of people's misfortune by buying their properties at substantially less than the going rate - and then only letting them stay on a short-term tenancy basis."

Jamie Carswell, housing spokesman for London Councils said: "London's authorities are keen to do whatever they can to help hard-pressed Londoners keep their homes, and these proposals will certainly help our efforts to do so.

"Without the measures announced today, we risk seeing a huge rise in homeowners becoming homeless through repossession - and this is why London Councils has been leading discussions on mortgage rescue.

"However, we think that councils can go even further than the plans outlined by government today: through our own flexible mortgage rescue schemes, by buying repossessed properties and by offering mortgages ourselves. We will continue to urge the government to provide us with the freedoms we need to set these plans in motion."

The Chief Executive of Child Poverty Action Group, Kate Green, said: "This is important extra help for families struggling to keep their heads above water and will hopefully make the difference for many homeowners. But it is only one element of a bigger strategy that is urgently needed to help families through the economic downturn.

"The Government must remember all those who are not homeowners but are also in danger of losing their homes because they cannot keep up with the rent and the bills.

"A package of measures to boost the incomes of the poorest families is essential in the Pre-Budget Report.

"The downturn means some hardworking families may join those already unable to work.

"It is vital that families excluded from work by redundancy, discrimination, low skills or who are working hard to care for children and disabled family members are given the income boost needed through essential welfare benefits to protect them from rocketing food and fuel costs."

Stewart Baseley, executive chairman of the Home Builders Federation, welcomed today's package, saying: "Advancing investment in social and affordable housing will help maintain housebuilding activity and capacity and a new shared equity scheme in which developers can be more directly involved is something the industry has previously shown its ability to implement successfully.

"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.

"We urge the Government to continue to advance work on this issue as a matter of urgency. The case for such action remains to avoid undue damage to the wider economy and to safeguard housing industry capacity for when conditions improve."

The Royal Institution of Chartered Surveyors (RICS) spokesman James Scott-Lee said: "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.

"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."

He added that not paying stamp duty would save buyers a maximum of £1,750, which was a "drop in the ocean" compared with the £27,738 RICS estimates people spend in upfront costs when buying a home.

He said: "RICS is pleased that the Government has ended the uncertainty over stamp duty, but there should be a complete holiday from stamp duty followed by reform of the slab system to a marginal system similar to income tax."

David Kuo, head of personal finance at money website Fool.co.uk, said: "Stamp duty is just one of many costs that housebuyers need to consider when purchasing a home.

"Affordability is crucial, and with house prices still overvalued, Fool.co.uk urges prospective buyers to tread carefully. Any benefits from a one-off tax boost could be wiped out if house prices fall as little as 1%."

Michael Coogan, director general of the Council of Mortgage Lenders (CML), said: "Essentially this package is directed at the blockages in the housing market for some vulnerable consumers.

"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.

"The stamp duty concession for properties under £175,000 is something of a curate's egg - good in parts. It will reduce transaction costs for some buyers, which is welcome, but we estimate that around half of all housing transactions will still be caught by stamp duty."

He added that the CML continued to see the funding problems in the mortgage market as a fundamental bar to meaningful housing market recovery, and the Government's attention should be at least as much on market funding as on today's consumer-targeted measures.

Citizens Advice chief executive David Harker said: "We welcome the package of measures announced today, particularly the cut in the waiting time and increased capital limit for Income Support for Mortgage Interest, reforms to the safety net for homeowners which we have been urging for some time.

"These could be an effective way of keeping people who lose their jobs suddenly and have no savings to fall back on in their homes."

Councillor Paul Bettison, Local Government Association spokesman, said: "Anything that is going to help keep hard-working families in their own homes and take pressure off scarce council housing is a step in the right direction.

"This is a significant package to stimulate the market, help those struggling with mortgage payments and help first-time buyers on to the property ladder."

But he warned: "The reality is that the Government is only really able to scratch the surface of a £400 billion market.

"The money made available will only help a small number of people who will need it over the next few years. The proposals will help around 20,000 families at a time when there are four million people waiting to get a council house."

Scottish National Party Treasury spokesman Stewart Hosie said the Government had been forced into its concession over stamp duty by fear that his party would repeat its Glasgow East by-election triumph in the forthcoming poll in Glenrothes.

Mr Hosie said: "It is the impact of SNP success and by-election pressure from Scotland that is forcing every concession from Gordon Brown and Alistair Darling.

"During Glasgow East we saw the U-turn on petrol duty, and in the run-up to Glenrothes we are now seeing some action on stamp duty.

"Still reeling from the SNP win in Glasgow East, and weeks away from another by-election in Glenrothes, the only reason this move has been announced is Labour's growing panic.

"Of course any initiative to help the housing market is welcome, but this is a mere sticking plaster from the Chancellor. More SNP success will force more concessions."