MortgagesJun 4 2015

Bricks and mortar are not for everyone

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Bricks and mortar are not for everyone

The ballots have been counted and verified, and the result is a surprisingly clear one. But how the outcome of the recent general election might affect the housing market, and particularly first-time buyers, still remains something of an unknown.

The Conservatives did not put forward a house-building target as such but were said to want to build 200,000 starter homes for first-time buyers under 40, to be sold at a 20 per cent discount. Help-to-Buy Isas would also be available for first-time buyers saving to buy a home. In addition, plans were announced to unlock enough sites for 400,000 new homes and funding for a further 275,000 affordable homes by 2020. The proposals to extend Right to Buy to housing associations also generated a large number of headlines.

Labour was reported to have pledged that first-time buyers would be spared stamp duty and moved to the front of the queue for new homes under plans to ease the national shortage of affordable houses and flats. Claiming that millions of families are being priced out of the property market, a Labour government was said to be committed to scrapping stamp duty for 90 per cent of first-time buyers.

The Liberal Democrats said they planned to give first-time buyers a leg up onto the housing ladder with a ‘rent-to-own’ scheme. This would result in the creation of 30,000 rent-to-own homes by 2020 through working with housing associations and other organisations.

Ukip vowed to restrict the Help-to-Buy scheme to British nationals with stamp duty axed for the first £250,000 of new homes on brownfield sites. Its ‘brownfield revolution’ was aimed at seeing 1m new homes built on land that has previously been developed on.

The Green Party suggested that it would scrap the Help-to-Buy scheme altogether, and introduce a ‘right-to-rent’ for homeowners so that those in financial difficulty could, with the help of the council, rent their home rather than lose it.

Exactly how important, relevant, clear and understood these policies were by voters is obviously difficult to determine. But the issue of FTBs would have continued to come under increased scrutiny no matter who gained power, both from the general public and opposition camps. FTBs and the house-building sector in general need strong support at governmental level irrespective of politics.

So where has this election result left first-time buyers? Again, this is a tricky question to answer at this stage, but all indications are that it will be business as usual for lenders, and that the FTB sector is unlikely to see any major immediate changes. If anything, the initial reaction was something of a collective sigh of relief among many housing market commentators.

Of course the focus on FTBs should not be restricted to those in and around the capital

This could well be due to a lack of radical policy shift in relation to a fairly robust UK economy and housing market. That is not to suggest that any potential change would have been necessarily bad. However, continuity can not be a bad thing as long as the market continues to move in the right direction, and a strong level of confidence is maintained, which – if initial reactions are anything to go by – certainly appears to be the case.

Inevitably, decisions and initiatives made at government levels will continue to be the main driving force behind any new supply chains and new-build developments. And finding or generating the right kind of solutions to take any existing or new initiatives to market are vital in helping to propel this sector forward.

At the time of writing the election result is still being dissected in terms of any short, medium or long-term effects across a variety of markets. Initial anecdotal comments suggest that this was a bullish outcome for the London property market, especially towards the higher end.

But to really help outline the continued problems facing FTBs in London and further afield, a recent study carried out by KPMG illustrated that the average first-time buyer would need to earn £76,971 a year to get onto the property ladder in London, while the average salary in the capital is currently said to stand at £27,999. The average salary required to buy a home across the whole UK is approximately £41,000.

The study also found that more than two-thirds of people (69 per cent) felt there were not enough affordable homes in the UK, and 30 per cent believe they may not be able to afford a property. Some 72 per cent of 16- to 17-year-olds said they would like to buy a home within 10 years, but this ambition is appearing increasingly implausible as the housing crisis continues.

Of course the focus on FTBs should not be restricted to those in and around the capital. Thankfully, the recent market recovery – buoyed by a wider improvement in mortgage credit availability and government initiatives, most notably the launch of the two Help-to-Buy schemes – has served to help a growing number of first-time buyers up and down the country.

The increased prominence of this higher level LTV scheme has also helped more first-time buyers to access the market without financial support from family members. This is certainly a welcome trend. However, it is important to emphasise that while recent CML figures show 48 per cent of new buyer purchases to be “unassisted” – a marked rise from 34 per cent in 2011 – the importance of financial support from parents and/or grandparents for many FTBs should not be underestimated when it comes to raising a sufficient deposit. And facilitating this additional financial backing appears to be an area in which more and more lenders are looking to bolster their propositions.

Innovation can exist within the current environment and within regulatory boundaries. There are lenders who are willing to push these lending confines to better support FTBs. FTB-specific products remain available to help borrowers in the raising of deposits as well as helping them adjust to their new financial responsibilities as homeowners over the terms of their loans.

As ever, more needs to be done to assist this vital cog in the housing wheel. The fact remains that the UK has not been building enough new houses for some time, and tackling this issue needs to be high on the new government’s agenda. However, this is certainly not a conundrum with any quick fix. It requires an appropriate and impactful long-term plan, and someone pushing it at the highest level to make any great impact. Let us hope that this government can find the right answers and work closely with home-builders, lenders and the mortgage market in general to help make this happen.

Andy Gray is managing director of mortgages at Barclays

Key points

The plight of first-time buyers remains an issue which will continue to come under scrutiny.

Anecdotal comments suggest that the election result was a bullish outcome for the London property market.

The increased prominence of a higher level LTV scheme has also helped more first-time buyers to access the market without financial support from family members.