The housing market has always been an important topic for the Government of the day and this has been as true as ever over the past month.
The launch of Help to Buy 2 three months early shows that the Government is aware of the importance of this issue and wants to show that it is taking steps to make it easier for people to own their own home.
However, recent comments from David Cameron are a good reminder that the housing market is moving at different speeds in different parts of the UK.
In London and the South East there is already talk of a bubble forming, which is somewhat ironic considering growth has been merely flat or slightly positive for the past few years. But in other parts of the country it is a very different story, with little or no house price growth.
Initial figures for Help to Buy show that more than three-quarters of applications have come from outside London and the South East, highlighting the fact that there remains a real need for assistance in many regions. As such, pulling Help to Buy too soon would be bad news for these areas.
While assisting with deposits and increasing the supply of available mortgage products may answer one side of the equation, the supply of housing stock continues to be a major problem. The long-term issue of housing supply needs to remain at the top of the political agenda. Even though house builders are projected to build up to 170,000 more homes each year for the next two to three years, it is still not enough to meet the chronic undersupply that the UK faces.
Another problem is stamp duty. Before the financial crisis, stamp duty was much lower and homeowners could often use the equity from the sale to cover the levy. However the increase in fees and the fall in house prices made this much harder.
As a result, ‘second steppers’ can find themselves unable to move on from their current home, which means there is less available stock for first time buyers. This creates a discord between supply and demand, which pushes prices up, making it even harder for people to get on the housing ladder.
To address this issue, the Government needs to consider reducing the tax or implementing another stamp duty holiday to help people move up the housing ladder.
The Government will need to act very carefully over the coming months, as all these problems need to be solved and balanced if a healthy equilibrium is to be restored and we are to create a housing market that is sustainable in the long-term.
This is not an easy task and there is a fine line between giving the housing market the boost it needs and pushing prices up too far in the South East, which could prevent parts of the population from being able to own their own home.
Ben Thompson is managing director at Legal & General Mortgage Club