December 2009/January 2010

TRY THIS W-AY, CHANCELLOR!

The NAEA’s present five-point plan designed to avoid market going into ‘W-shaped’ recession

THE National Association of Estate Agents has called on Chancellor of the Exchequer Alistair Darling to aid the housing market recovery and avoid sending Britain into what it fears could be a ‘W-shaped’ recession.

In a five-pronged submission delivered to Downing Street in the run-up to the pre-Budget report, the NAEA calls on Mr Darling to:

Immediately extend the current Stamp Duty holiday;
Conduct a longer-term review into the function of Stamp Duty;
Intervene in mortgage markets to encourage banks to lend again;
Improve access to finance for first-time buyers;
Suspend Home Information Packs.

The submission comes hot on the heels of the call already made by the NAEA and other property organisations for the Government to abolish the “anachronistic” Stamp Duty, which is set to be reintroduced to properties worth between £125,000 and £175,000 at the turn of the year.

Peter Bolton King, the NAEA’s chief executive, said: “The current Stamp Duty ‘holiday’ for properties up to £175,000, is due to cease at the end of this year.

This, coupled with the reversion of VAT to its original rate of 17.5 per cent and possibly beyond in the future, threatens to cause damage to the fragile recovery we have so far seen in housing sales, just at the time when further stimulus is drastically needed.

“It is clear that Stamp Duty is an outdated and unpopular tax that is out of date and out of place in today’s world.

“The NAEA calls on the Government to commit to examining the future of the tax to see how it can be amended to produce less regional inequality and to stop it acting as a barrier to entry to the housing market. We would welcome the chance to be part of this review.”

On the question of intervention in the mortgage markets to encourage banks to lend again, Mr Bolton King added: “The lack of available mortgage finance is significantly hampering the supply of, and access to, mortgages.

“Despite considerable public pressure, banks continue to restrict access to mortgage finance and charge rates far higher than the current level of interest rates. A more interventionist solution is now required to force banks to lend again.

“First-time buyers are central to a properly functioning housing market but the lack of mortgage finance is particularly impacting on this group.

“High loan-to-value mortgages are being withdrawn and the consequent rise in the amount being demanded in deposit means it is becoming increasingly difficult to gain a foothold on the housing ladder.

“The NAEA calls on the Government to actively encourage lenders to provide high loan-to-value mortgages to enable first-time buyers to enter the market.

“We recognise that high loan-to-value mortgages carry additional risk for the lender, so we are calling on the Government to actively promote the use by lenders of Mortgage Indemnity Guarantees or mortgage insurance on properties with a high loan-to-value ratio.

“We also call on the Government to examine the viability of running a state-backed MIG scheme for lenders.”

On HIPs, which have been the subject of much speculation over what their future will be should the Conservatives win the General Election next year, Mr Bolton King said: “The cost of the Packs punishes sellers, while more than three quarters of buyers do not consider them before they decide whether to buy a property.

“During a recession this is an unacceptable situation. The NAEA calls on the Government to immediately suspend HIPs while the UK economy is in recession, and to commit to re-examining their viability once the economy is out of recession.”