Coalition ready to let property values fall
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Finlay: ‘Concentrating on the economy’
Industry experts believe the Government is more focused on helping businesses than it is on supporting the housing and mortgage markets.
Speaking at a Money Marketing round table last week, Barclays director of intermediaries David Finlay said the Government sees the housing market as something that will start to recover naturally after the rest of the economy is on a better footing.
Broadhead: ‘Support is unravelling’
He says: “I think the coalition Government has taken a slightly different view, in that they are very much looking at the business economy and the banking sector as a whole. I think they are potentially looking at housing as the lag element to their wider proposition. All they are really concentrating on is the economy.”
Association of Mortgage Intermediaries director Robert Sinclair said the Government does not want to stimulate the housing market and it may even want to see property values fall from a “disproportionate” level.
He said: “They do not want to be in that position again where people treat their properties like an ATM. We have got this big pressure coming from the Treasury where we saw this big rise in the capital value of property which they believe was disproportionate.
Sinclair: ‘Expect fall in values’
“They do expect this fall in the capital values of residential properties from about £4trn. They think £3trn might be a better number, nobody is going to come out and say that though.”
Building Societies Association head of mortgage policy Paul Broadhead said: “All of a sudden, it seems the support is unravelling, which will make consumers far more cautious about whether they should upsize now and whether they should even get on to the ladder.”
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Readers' comments (23)
Trevor Mealham INEA (The Independent Network of Es | 16 Jul 2010 1:58 pm
At INEA we have creatively thought of a private self funding structure that would allow properties to again sell. It works alongside lenders offering 80-20 mortgages to bottom end buyers and we believe could release £billions. Alike, we are finding the coallition is not interested in listening to ways of getting things moving yet. I'd welcome communications to explore our idea with lead lenders and their product dev teams. Trevor Mealham
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Tom K | 16 Jul 2010 2:57 pm
@ Trevor of INEA - which do you think would get things moving best, a 25% fall in prices as outlined in the arrticle, or some mickey mouse shared ownership scheme?
Seems to me, if you want to be earning again, EAs are backing the wrong horse. Get solidly behind realignment in prices and volumes will increase accordingly. Mortgages will get easier to come by once the drop banks are scared of is over, while the current mexican standoff between buyers and sellers will also end.
Wise up, matey.
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Steven Martin | 16 Jul 2010 3:01 pm
@Robert Donaldson, @Andy Dyson
The answer to your question why not let the money pass down the generation is, at least in Andy's case, answered by the question. It is simply the fact that there would be no taxation generated. No government wants to tie money up indefinitely in a tax preferred environment without the possibility to dip into it.
It would seem reasonable to tax residual funds in-line with IHT at 40%. As there has been tax elief on the way in it would seem reasonable that there is no exempt amount ie every penny is taxed. However it would also make sense to allow a transfer into another persons pension after deducting 25% tax which would be the same as adding basic rate relief onto the 60% you would otherwise receive but allow you to contribute the full amount.
This would continue to provide revenue to HMRC, in part avoid people loading up their pensions to escape IHT and increase the amount of money set aside for the population i general for their retirement.
Steve
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Anonymous | 16 Jul 2010 3:09 pm
It is about time this government allowed the housing market to find it's own level!
For far too long there was an unfettered approach to the housing and mortgage lending markets.
Wake up people and smell the coffee!
Indisciplined and imprudent lending has come back to bit our backsides, and so it should.
Let's get back to affordable, common sense lending practices, rather than encourage punters to believe their properties were an eternal milsch cow.
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Andrew Harwood | 16 Jul 2010 3:14 pm
It is absolutely right that house prices should re-discover a correct value based on realistice levels of borrowing. The more first time buyers can borrow against income the higher the price that can be achieved and this moves up the scale to second and third time buyers.
Residential property should not be targeted for investment purposes. A fall in the " buy to let" market should cause prices to fall and make available to first time purchasers, property that has to date been unaffordable to the vast majority. Such a situation is grossly unfair and needs to be remedied.
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David Irving | 16 Jul 2010 3:25 pm
Sorry, but property prices have got to be allowed to find their natural level. The economy got out of hand during the last 10 years because too many people did treat their property like an ATM. The economy never had a proper boom, it was all an artificial feeling of greater wealth stimulated by falling interest rates and borrowing on the back of the subsequent release of income. The sooner we realise that we have to actually work to increase the wealth of this country, the better.
Look around, we still have far too many private landlords. This isn't the 'Home-owning, Share-holding democracy' that Margaret Thatcher envisaged. At the same time, its not the centralised, state-organised co-operative democracy that traditional socialists would like. The economy is an ugly mess at the moment.
Think about how many first-time buyers can get on the property ladder at the moment. And how old they are when they finally do manage it. It can't be right that this is allowed to happen. They are being squeezed out of the market by private landlords who have much more disposable wealth than they do, meaning that an ever-shrinking number of people own all the property in this country.
We have to stop and take stock of what we are actually doing, not just brush it off by blaming somebody else
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Richard | 16 Jul 2010 3:26 pm
The sooner house - and indeed other asset prices come down to more realsitic ( and affordable) levels the sooner things will begin to start to pick up again. Don't expect the bottom in housing and commercial property for art least 24 months.
Cameron is right - support the wealth creation first and housing property will start to improve -
The other way round - which interestingly is what is happening with QE and ultra low interest rates is - is not working - you are pushing at a piece of string.
Wise up/ wake up property boys - you may need another job for a few years
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Blah, Blah, Blah | 16 Jul 2010 4:13 pm
All that going around the table must have been quite dizzy work? Was there any discussion on lobbying government by the trade bodies? I assume not?
However you cut it, simple fact - UK Housing is integral to the health of our economy, with a large dollop of positive sentiment required to hold and drive forward. The negative multiplier effects of a housing market in recession are huge.
OK, let’s assume the plan succeeds, the market is cunningly strangled to submission by ‘intrusive’ FSA regulation with the desired effect being achieved and property prices fall from their disproportionate levels; Then unemployment rises (particularly in financial services); I guess inflation also rises; and income will of course need to fall; bingo! We will all be in far better shape? Can't wait!
Perhaps it is time for someone in government to lead us away from jobs-worth decision making based on too many meetings around too many round tables? Or is that impossible within a coalition?
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jim | 16 Jul 2010 4:20 pm
@Trevor INEA
I am a potential first time buyer. I have a very sizeable deposit stashed away and will be ready to buy when house prices come back down to sensible levels. I know other people in my situation. We are not about to part with our 'real earned money' to pay someone pensions based on fantasy money their house has 'earned' them. No amount of shared ownership nonsense is going to change that. When house prices come down - I will spend my cash and an Estate Agent like yourself will benefit. It is in your interest to get ahead of the game and help bring house prices back to affordable levels rather than waste your time and effort cooking up crazy schemes to part the few remaining idiots from their money. Ultimately it comes down to this: I can hold on to my cash indefinitely. How long can you afford to go without commission?
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jim | 16 Jul 2010 4:25 pm
@Blah, Blah, Blah "simple fact - UK Housing is integral to the health of our economy"
and this is why we are a basket case.
it is non-productive and eats away at the real economy in a variety of ways. I don't dispute that it is integral, but it should not be. The sooner a disconnect is made between growth measured by house price speculation and real growth generated by productive business - the better for all of us.
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