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How will the House put housing in order?

House price rises and the plight of first-time buyers mean that housing has featured more prominently in this general election than in past years.

All the parties have promised help for FTBs. In his Budget last month, Chancellor Gordon Brown raised the stamp duty threshold to 120,000. The LibDems have pledged to raise the threshold to 160,000 while the Conservatives say they would lift it to 250,000.

With the average house price standing presently at around 165,000, according to the Halifax, the Tory policy would exempt many FTBs and homeowners who trade down. The measure forms part of the 4bn earmarked for tax cuts in the first Budget of a Tory Government.

The first-time buyer market is potentially lucrative for lenders but some are unconvinced that any of the main parties’ proposals for stamp duty would have the desired effect.

Alliance & Leicester head of intermediary mortgages Mehrdad Yousefi says: “It would be good if the Chancellor, whoever that may be, abolishes stamp duty because we believe that the debate is how, in a mature housing market, you keep it moving year in, year out. We believe that first-time buyers should have the chance to enter the housing market without any extra entry costs.”

BM Solutions senior products manager Colin Barrett says: “There is certainly a lack of new blood in the housing market and something needs to be done for the FTBs to counter this. A general alteration of stamp duty levels might not be enough and it may be appropriate to offer cert- ain stamp duty exclusions for FTBs.”

Another option could be Labour’s shared-equity scheme. Labour is promising to increase homeownership by allowing people to buy a share of their home and rent the remainder, with an option to buy the rented share at a later date. The mortgage would be administered by lenders but underwritten by the Government although the details of the scheme are still unclear.

But if people have to pay a market rent for the proportion of the property they do not own, it may not prove to be a cheap option.

One Labour policy which has been warmly received is the initiative in the pension simplification plans to allow investors to include property in their pension portfolios from next April.

The mortgage industry has reacted positively to what is seen an opportunity for higher-rate taxpayers to obtain generous tax relief.

Yousefi believes that as long as lenders can come up with innovative products by next April, the move could present a chance for existing customers to reallocate their assets.

The Mortgage & Investment Centre director Jacob Isaac says: “This will be a fantastic opportunity but there are two problems here. First, the rules still have not been defined. Until we get some idea of how this will work, I am not sure how lenders and Sipp providers can be ready to service the market. Second, I believe this will service buy-to-let investors but do little to help owner-occupiers. BTL investors are going to get a very good deal out of this.”

Barrett says: “A Sipp is a perfect investment vehicle for the big investor and is set to increase numbers in the BTL market. Any future Government needs to make sure, however, that the correct balance remains in the market and that FTBs and BTL investors are not chasing the same properties.”

All three of the main parties have pledged to build up homeownership and new homes. Labour says it will create one million new homeowners by 2009, alongside housebuilding targets over the next 20 years. A plan to build affordable homes on surplus public land will initially create about 5,000 new properties.

The Conservatives are proposing to extend the right-to-buy housing association initiative to one million tenants but are resisting Prescott’s housebuild- ing targets in the South-east. The LibDems say that they would allocate land for 100,000 new homes in its first year.

But Premier Mortgage Services managing director John Malone does not believe these initiatives will help FTBs or first-time sellers. He says: “I firmly believe that people have the right to a decent property in a decent areas. Properties are a national asset and provide value in the community. I am annoyed by the professional landlords and speculators. New builds are being bought by the BTL landlords and speculators because it is a very easy purchase at an easy set price.”


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