The government’s package of measures to support the housing market contains one good measure. The rest is spin and dolly mixture, especially as far as Planet London is concerned.
Raising the threshold for Stamp Duty from £125,000 to £175,000 is intended to help first time buyers, who will save up to £1,750. But it will do nothing to help the wider market, and as I argued recently,
homeowners wanting to move are the ones worst hit by high rates of Stamp Duty. I also question how many FTBs will be able to afford to buy just because of the Stamp Duty cut, since the average deposit required is over 15 times the Stamp Duty saving.
On top of that, many FTBs in Planet London pay more than £175,000 for their first home and will see no benefit from this move.
Cut in qualifying period will help
The one good measure in the package is a cut from 39 to 13 weeks in the qualifying period before homeowners are entitled to claim State benefits in the form of Support for Mortgage Interest. This comes into effect next April, and should prevent some struggling homeowners having their properties repossessed. But the capital limit at £175,000, while adequate for most of the country, is simply too low for Planet London.
The rest of the measures are dolly mixture money. While £400 million may sound a lot, it will result in just 5,500 more ‘affordable’ homes being bought by social landlords over the next 18 months. A new £300 million shared equity scheme will enable FTBs to buy properties with a five year no-interest loan for 30% of the purchase price. The developers have to bear half the cost, which they may see as a reasonable price to pay to shift properties from their books, but valuation is going to be a tricky issue. As I’ve said before, most city centre flats are still overvalued compared with traditional properties.
And again, in Planet London many people will be disqualified because only those with household income under £60,000 are eligible. This looks like yet another of those measures we’ve seen so many of in recent years, that come with big blasts of hot air and turn out to achieve nothing at all.
Darling is confused
Chancellor Darling’s panic talk about ‘the worst conditions for 60 years’ really does cast him as a blunderer who deserves the sack.
We are not heading into a 1980s or 1990s style recession. The US economy already shows signs of recovery – we’re normally 9-12 months behind. Interest rates will almost certainly be falling next year. The world economy is still in growth mode.
Pretending that things are worse than they are is a feeble attempt to deflect criticism from the government, which still has to face its biggest test, how to get the mortgage market working normally again. Between Brown and Darling – Tinker and Blunder – I am not at all confident they will make a good fist of it.
