From Times Online
May 14, 2010
Stamp duty holiday fails to help would-be buyers
The new tax threshold has only attracted first-timers who would have bought anyway, agents say
Francesca Steele
From Glasgow to Gloucestershire, most estate agents are in agreement about one thing: first-time buyers are likely to struggle to get a foot on the property ladder for some time after the election, despite the new stamp duty threshold and reports that property prices are falling again.
The new threshold of £250,000 — under which properties bought by first-time buyers are exempt — has been tempting a few more people into the market, according to agents in Worcester and in Kennington, South London. However, most of these eventually opt for something more expensive anyway, suggesting that they are not the demographic most in need of a leg up.
According to Justin Bhoday, of Kinleigh Folkard & Hayward’s Kennington branch, the tax relief, introduced by Alistair Darling in March, has merely given buyers who were waiting out the downturn a nudge, rather than helping truly cash-strapped first-timers, “Lots of first-time buyers come to us asking for something under £250,000 but eventually go for something around £300,000 because the properties are so much better. Most are young professionals in their early thirties, who would otherwise have bought a few years ago. The tax change has just given them the confidence to start looking again.”
Rightmove, the property website, says that 26 per cent of people planning to buy a property in the next 12 months are first-time buyers. This figure is only 0.5 per cent higher than when the survey was carried out in January — before the tax relief was introduced. It says that the figure falls well short of the 40 per cent of buyers who should be first-timers in order to have a healthy housing market.
London has the highest proportion of potential buyers who will be purchasing their first home (43.3 per cent) despite higher prices. Miles Shipside, director of Rightmove, says that this is because of a combination of better-paid jobs, more inherited wealth (in other words, better-funded banks of Mum and Dad) and the willingness of banks to lend in locations that they see as safe havens.
Most agents agree that the fundamental obstacle for first-time buyers remains: the majority still cannot secure a mortgage, with banks continuing to turn away all manner of applicants, from those with a low deposit (the average deposit for first-time buyers is 25 per cent) to those without a landline telephone.
Andrew Bruce, a senior surveyor at Edwin Thompson in Berwick-upon-Tweed, where two-bedroom houses can be found for less than £100,000, says: “Houses are more affordable here than elsewhere in the UK, but the average salary is lower. Since banks are lending small income multiples, first-time buyers are still priced out. If you are on £15,000 a year, you can’t afford a deposit of £20,000 or more.”
Ian Martin Briggs, of Dacre, Son and Hartley, in Ilkley, West Yorkshire, agrees: “The unduly harsh lending terms imposed on first-time buyers have effectively frozen out a whole generation from home ownership locally. A new government must force banks to actually lend to this sector.”
The banks say that there is a funding gap that has left them unable to lend as much as they would like. The Council of Mortgage Lenders (CML) says that since wholesale lending (what banks lend to each other) collapsed in the credit crunch, government support has provided only 25 per cent of what lenders could offer previously. It adds that these schemes will be coming to an end from next year.
However, lenders say that wholesale funding has started to return in recent months. Melanie Bien, director of the independent mortgage broker Savills Private Finance, also points out that rates have begun to improve, with increasing availability of 85 per cent and 95 per cent loan-to-value (LTV) mortgages, such as Clydesdale Bank’s 95 per cent LTV three-year fix at 6.99 per cent.
“We expect the softening in lenders’ criteria to continue. If there is more choice at 85 per cent LTV and above, this will mean more competitive rates, which is good news for first-time buyers who don’t have much in the way of a deposit.”
However, Bien cautioned that the coalition Government had created an air of uncertainty and that saving a big deposit would still be key in the coming months. A spokeswoman for the CML added: “It is the responsibility of the new Government to ensure that lenders have adequate help. We are concerned about what will happen when the current schemes expire.”
Mum and Dad’s home help made all the difference
If Charlie Fisher’s parents had not stumped up a third of the deposit on the home that he has just bought with his fiancée, Rosie, 25, the couple would not have been able to afford the repayments on their £267,000, two-bedroom cottage in Bray, Berkshire.
“Their help brought down the loan-to-value ratio significantly,” says Charlie, 28, pictured with Rosie.
“The interest rate would have been 5.6 per cent otherwise — it came down to 3.7 per cent. The difference in repayments is about £600 a month.”
Charlie, an estate agent, thinks that all first-time buyers should be exempt from stamp duty, regardless of the value of the property. He says that this would help those in areas such as London and the South East, where prices of starter homes are often higher than the new £250,000 stamp duty threshold. The couple bought now because Charlie believes that house prices may rise further and he spotted a pre-election window of opportunity, with fewer competing buyers. They plan to be in the property for at least four years.
Rebecca O’Connor
http://property.timesonline.co.uk/tol/life_and_style/property/article7125468.ece
The new threshold of £250,000 — under which properties bought by first-time buyers are exempt — has been tempting a few more people into the market, according to agents in Worcester and in Kennington, South London. However, most of these eventually opt for something more expensive anyway, suggesting that they are not the demographic most in need of a leg up.
According to Justin Bhoday, of Kinleigh Folkard & Hayward’s Kennington branch, the tax relief, introduced by Alistair Darling in March, has merely given buyers who were waiting out the downturn a nudge, rather than helping truly cash-strapped first-timers, “Lots of first-time buyers come to us asking for something under £250,000 but eventually go for something around £300,000 because the properties are so much better. Most are young professionals in their early thirties, who would otherwise have bought a few years ago. The tax change has just given them the confidence to start looking again.”
Rightmove, the property website, says that 26 per cent of people planning to buy a property in the next 12 months are first-time buyers. This figure is only 0.5 per cent higher than when the survey was carried out in January — before the tax relief was introduced. It says that the figure falls well short of the 40 per cent of buyers who should be first-timers in order to have a healthy housing market.
London has the highest proportion of potential buyers who will be purchasing their first home (43.3 per cent) despite higher prices. Miles Shipside, director of Rightmove, says that this is because of a combination of better-paid jobs, more inherited wealth (in other words, better-funded banks of Mum and Dad) and the willingness of banks to lend in locations that they see as safe havens.
Most agents agree that the fundamental obstacle for first-time buyers remains: the majority still cannot secure a mortgage, with banks continuing to turn away all manner of applicants, from those with a low deposit (the average deposit for first-time buyers is 25 per cent) to those without a landline telephone.
Andrew Bruce, a senior surveyor at Edwin Thompson in Berwick-upon-Tweed, where two-bedroom houses can be found for less than £100,000, says: “Houses are more affordable here than elsewhere in the UK, but the average salary is lower. Since banks are lending small income multiples, first-time buyers are still priced out. If you are on £15,000 a year, you can’t afford a deposit of £20,000 or more.”
Ian Martin Briggs, of Dacre, Son and Hartley, in Ilkley, West Yorkshire, agrees: “The unduly harsh lending terms imposed on first-time buyers have effectively frozen out a whole generation from home ownership locally. A new government must force banks to actually lend to this sector.”
The banks say that there is a funding gap that has left them unable to lend as much as they would like. The Council of Mortgage Lenders (CML) says that since wholesale lending (what banks lend to each other) collapsed in the credit crunch, government support has provided only 25 per cent of what lenders could offer previously. It adds that these schemes will be coming to an end from next year.
However, lenders say that wholesale funding has started to return in recent months. Melanie Bien, director of the independent mortgage broker Savills Private Finance, also points out that rates have begun to improve, with increasing availability of 85 per cent and 95 per cent loan-to-value (LTV) mortgages, such as Clydesdale Bank’s 95 per cent LTV three-year fix at 6.99 per cent.
“We expect the softening in lenders’ criteria to continue. If there is more choice at 85 per cent LTV and above, this will mean more competitive rates, which is good news for first-time buyers who don’t have much in the way of a deposit.”
However, Bien cautioned that the coalition Government had created an air of uncertainty and that saving a big deposit would still be key in the coming months. A spokeswoman for the CML added: “It is the responsibility of the new Government to ensure that lenders have adequate help. We are concerned about what will happen when the current schemes expire.”
Mum and Dad’s home help made all the difference
If Charlie Fisher’s parents had not stumped up a third of the deposit on the home that he has just bought with his fiancée, Rosie, 25, the couple would not have been able to afford the repayments on their £267,000, two-bedroom cottage in Bray, Berkshire.
“Their help brought down the loan-to-value ratio significantly,” says Charlie, 28, pictured with Rosie.
“The interest rate would have been 5.6 per cent otherwise — it came down to 3.7 per cent. The difference in repayments is about £600 a month.”
Charlie, an estate agent, thinks that all first-time buyers should be exempt from stamp duty, regardless of the value of the property. He says that this would help those in areas such as London and the South East, where prices of starter homes are often higher than the new £250,000 stamp duty threshold. The couple bought now because Charlie believes that house prices may rise further and he spotted a pre-election window of opportunity, with fewer competing buyers. They plan to be in the property for at least four years.
Rebecca O’Connor
http://property.timesonline.co.uk/tol/life_and_style/property/article7125468.ece
No comments:
Post a Comment